Wedding bells may soon be ringing, but likely not for JetBlue Airways. Today JetBlue sweetened its proposal to Spirit Airlines, offering to acquire all of the outstanding common stock of Spirit for $33 cash per share. The stock is currently trading at $23.61 per share.
JetBlue said in a statement that its enhanced proposal offers Spirit shareholders better value and greater certainty than the bid from budget carrier Frontier Airlines. JetBlue also added divestiture commitments and a reverse break-up fee to its previous all-cash offer of $3.6 billion.
But Spirit has already spurned JetBlue’s latest proposal, saying it still prefers its other suitor. The budget carrier’s board unanimously determined that JetBlue’s proposal is not better than Frontier’s because “the proposed transaction is not reasonably capable of being consummated,” according to a statement from Spirit.
“The Board continues to believe that the pending transaction with Frontier represents the best opportunity to maximize value and recommends that Spirit shareholders adopt the merger agreement with Frontier,” said Spirit.
In a letter to JetBlue CEO Robin Hayes, Spirit’s Chairman of the Board, Mac Gardner, wrote that Spirit “continues to believe in the strategic rationale of the proposed merger with Frontier” because it is “the best opportunity to maximize long-term shareholder value.”
JetBlue’s alliance with legacy carrier American Airlines is a major sticking point. The partnership, called the Northeast Alliance, allows each airline’s frequent flyers to have access to perks on the other airline.
Gardner cited concerns that the government would allow a JetBlue-Spirit merger to move forward. “We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue’s Northeast Alliance (NEA) with American Airlines remains in existence,” he wrote. “We struggle to understand how JetBlue can believe DOJ, or a court, will be persuaded that JetBlue should be allowed to form an anticompetitive alliance that aligns its interests with a legacy carrier and then undertake an acquisition that will eliminate the largest [ultra-low-cost carrier].”
“We further believe that your divestiture proposal is unlikely to resolve DOJ’s concerns about a combination of Spirit and JetBlue if the NEA continues in existence,” wrote Gardner.
In airline mergers, as in life, the heart wants what the heart wants. Spirit’s heart appears to want the deal it believes has the best shot at passing muster with regulatory authorities. “We believe that is a clear, pro-consumer narrative that will resonate more successfully with DOJ than a combination with JetBlue, which would eliminate the largest [ultra-low-cost carrier] and remove significant low-cost/low-fare capacity,” wrote Gardner.