The board of Spirit Airlines has postponed its highly-anticipated June 30 shareholder's meeting to vote on a merger with Frontier Airlines. In an SEC filing lodged late on Wednesday, Spirit said the decision would allow the Spirit's board to continue discussions with Frontier and JetBlue Airways and to continue to solicit proxies from its stockholders. The new date for the shareholder vote is July 8.
JetBlue's dogged pursuit pays off
Many observers had anticipated Thursday's planned vote as a slam dunk for the pro-Spirit/Frontier merger camp. Spirit's board had recommended its shareholders vote to approve the merger, and Frontier's CEO had been doing the rounds of news outlets explaining why the merger was a good idea. But JetBlue has relentlessly undermined the Frontier/Spirit merger with its own Spirit Airlines hostile takeover campaign. Wednesday's postponement decision is a win for the long odds New-York based airline.
"We compliment the Spirit board for listening to their shareholders, who clearly were not supportive of the Frontier transaction," JetBlue CEO Robin Hayes said on Wednesday evening. "It's clear that Spirit shareholders have now handed the Spirit board an undeniable mandate to reach an agreement with JetBlue. The Spirit board has so far not walked away from the Frontier transaction, and we continue to strongly recommend that Spirit shareholders let the Spirit board know that preventing their shareholders from receiving the superior value JetBlue has proposed is unacceptable by voting against the Frontier transaction."
That's JetBlue's making its position quite clear. They've continued to outbid Frontier's ever-escalating best offer for Spirit. JetBlue is currently offering an all-cash price of at least US$33.50 per Spirit share and a variety of other financial inducements. But in this bidding war, that price could change overnight.
Postponement temporarily takes the wind out of Frontier Airlines' bid
While it's always nice to be popular, Spirit CEO Ted Christie has been swatting away JetBlue's attentions like a teenager dealing with an unwanted crush. He cites antitrust regulatory hurdles, ongoing litigation with the DOJ over the Northeast Alliance, and a reluctance to discuss the risk to shareholders their takeover bid entails as reasons why he is against the JetBlue bid.
On the other hand, Frontier Airlines has got all the right moves and has Mr Christie's full and undivided attention. He calls the Frontier/Spirit merger "very accretive," a "positive regulatory story," open, beneficial to employees, and one that delivers value.
"We've landed on viewing the Frontier proposals superior for all those reasons," Mr Christie said this week.
At the time of writing, Frontier hasn't responded to the breaking news of the meeting postponement, but it is unlikely CEO Barry Biffle will be amused. Earlier this week, he was confident of gaining shareholder approval at Thursday's meeting and consigning JetBlue to the outer field. On Monday, Mr Biffle said he felt "really good" about the shareholder vote.
On Tuesday, in an unusually direct SEC filing, Frontier Airlines said that "a Spirit acquisition by JetBlue would lead to a dead-end—a fact that no amount of money, bluster, or misdirection will change. The only value Spirit stockholders would likely receive from JetBlue's proposal is the reverse termination fee because JetBlue's proposal lacks any realistic likelihood of obtaining regulatory approval."
But with JetBlue continually offering more money, it might reach a point where Spirit's board decides to test that opinion out.