In the continuous tug-of-war acquisition of ultra-low-cost carrier Spirit Airlines, JetBlue is making its fourth offer since March, with a slightly different twist than the previous three. Could the fourth time potentially be the charm?

Earlier this month, shareholders of Spirit were scheduled to vote on the Frontier merger deal, which has thus far seemed slightly more attractive than the JetBlue offers. Then, in yet another twist of events, Spirit announced it would provide JetBlue with the same due diligence that Frontier had received, leveling the acquisition playing field between the two suitors. Additionally, the vote was postponed to June 30th.

An improved proposal

On June 20th, New York-based JetBlue submitted an improved proposal to the Board of Directors of Spirit. The enhanced proposal sees JetBlue boosting its takeover offer for Spirit to $33.50 per share in an all-cash premium, which represents an improvement of $2.00 per share or 6.3% compared to JetBlue’s June 6th proposal, and a 67.6% premium to the implied value of the Frontier transaction from June 17th.

The enhanced proposal also includes a significant enhancement to its prior proposals through an obligation to divest assets of JetBlue and Spirit up to a material adverse effect on the combined JetBlue-Spirit. This improved commitment would essentially increase the divestiture JetBlue would be willing to commit just to exceed the divestiture commitment from Frontier. However, the promise does not include abandoning JetBlue's Northeast Alliance with American Airlines - which could prove to be an expensive problem.

Nonetheless, with the improved terms, JetBlue has increased confidence that the JetBlue-Spirit transaction will happen, as highlighted by Chief Executive Officer Robin Hayes:

“Our previous proposal was met with an extremely positive reaction from Spirit stockholders, and we believe they will be even more pleased with these improved terms, including additional regulatory commitments that reflect our confidence in our ability to obtain antitrust approval and are a direct result of our diligence."

Edging ahead of Frontier?

Besides upping the sale price and the promise to divest more assets of both airlines, the new proposal from JetBlue will continue to include commitments from its previous offers that were well appreciated by Spirit shareholders due to the edge offered over the terms given by Frontier.

One attractive commitment that may have moved JetBlue ahead of Frontier was the reverse break-up fee, which is being offered at $350 million, payable to Spirit should the transaction fail due to antitrust reasons. This represents an increase of $100 million compared to the reverse break-up fee Frontier agreed to on June 2nd. While JetBlue remains optimistic about its odds, regulators in the Justice Department might not feel the same and may not allow the low-cost carrier to acquire Spirit and maintain its partnership with American Airlines. Should regulators block the deal, this would be quite an expensive problem for JetBlue.

Another favorable term was the accelerated prepayment, which will see JetBlue repaying $1.50 per share in cash to Spirit stockholders promptly following the Spirit stockholder vote approving the merger between both airlines. As a result, Spirit stockholders would receive total aggregate consideration of $33.50 per share in cash, comprised of $32 per share in cash at the closing of the transaction and the prepayment.

Time to decide

It's slightly more than a week until the end of June when the shareholders of Spirit are expected to make their final decision. If in favor of Frontier and its cash-and-stock offer, the low-cost competition would become more consolidated - which may prove valuable in today's times when passengers aren't too pleased with rising airfares.

On the other hand, going in favor of JetBlue and its all-cash offer would benefit Spirit due to the carrier's extensive network and services. However, regulators can also block the deal, leading to the shareholders choosing to vote for Frontier instead to avoid rejection. Whichever the final choice may be, there are still nine days to wait. If the last few months are anything to go by, the next nine days could still provide several surprises from any party involved.