Spirit Airlines has delayed a crucial shareholder meeting until later this month as its board of directors mulls over the latest counter-offer from JetBlue Airways, which aims to thwart the proposed merger between Spirit and Frontier Airlines.
No vote for now
In the latest twist in the protracted saga involving three of the larger carriers in the US, Spirit Airlines has announced today that it has decided to delay a crunch shareholder meeting that was due to take place this Friday, 10th June.
During that meeting, shareholders were due to vote on the proposed merger with Denver-based Frontier Airlines, a deal that officially still has the backing of Spirit's management. The vote has been rescheduled for 30th June, for the time being at least.
The decision to delay follows the news on Monday of this week that JetBlue has sweetened its offer to buy the budget carrier, trumping the latest offer made by Frontier just last week. JetBlue has offered to pay Spirit's shareholders US$350 million as a 'reverse break-up fee' should its takeover be blocked on antitrust grounds by US regulators.
This amount represents an increase of US$100 million over the offer of $250 million made by Frontier last week. The new-and-improved deal offered by JetBlue involves the enhanced reverse break-up fee which would be paid in cash and upfront - an offer described by JetBlue as "superior by any measure" compared to that of Frontier.
Following the announcement by Spirit Airlines to delay the crucial vote until 30th June, Robin Hayes, Chief Executive Officer for JetBlue, stated,
We welcome this development as a necessary first step toward genuine negotiations between the Spirit Board and JetBlue. Spirit shareholders are clearly urging the Spirit Board to engage with us constructively and provide us with the same information previously made available to Frontier so that we can reach a consensual transaction.
The improved proposal we submitted to the Spirit Board earlier this week clearly offers the most compelling value available for Spirit stockholders and we remain fully committed to acquiring Spirit. We are confident a combined JetBlue-Spirit will create a true national competitor to the dominant big four carriers that will result in lower fares and better service for customers while offering Spirit shareholders the most attractive value-creating opportunity available to them.
Some distance left to run
Denver-based Frontier announced its intention to buy Spirit in a multi-billion deal back in February of this year that would create the fifth-biggest airline in the United States and dominate the domestic ultra-low-cost-carrier market. Meanwhile, JetBlue launched a hostile takeover bid for Spirit in April after its initial informal approaches were rejected.
On commenting on this latest development in the story involving the three carriers, a spokesperson for Spirit Airlines said,
"The Special Meeting [due on 10th June] was postponed to allow the Spirit Board of Directors to continue discussions with Spirit stockholders, Frontier and JetBlue Airways."
Following the news that Spirit directors were going to take their time in reviewing to review and consider the latest offer from JetBlue, shares in the Florida-based airline fell 1.2%. Conversely, shares in both JetBlue and Frontier traded slightly higher.
It's not over yet
US-based carriers have been trying to expand their domestic footprints to increase market share while also facing persistent labor and aircraft shortages. Either of the two deals currently on the table for Spirit will create the fifth-largest US airline.
As an added twist in the tale, just last week, proxy advisory firm Glass Lewis recommended Spirit investors back the Frontier deal. In contrast, another proxy firm, Institutional Shareholder Services, advised against it. This is important as these firms provide advice directly to the institutional shareholders of Spirit as to which way they should vote.
This latest development indicates that there is possibly more drama to unfold in what is fast becoming a 'must watch' for anyone interested in mergers and acquisitions in the airline industry.
What set out as a relatively clean-cut takeover of Spirit by Frontier back in February has become a hard-fought bidding war, with none of the key protagonists indicating a backing down or yielding to the other at this stage.
Only time will tell as to which way this drama will end. And although the date for the crucial vote is slated for the end of this month, there could be plenty of mileage left in the story before any deal is finally completed.
What are your thoughts on this latest development? Do you think that JetBlue or Frontier will ultimately prove to be the winner in this tussle for Spirit? Let us know in the comments.