West News Wire: If the merger with Spirit Airlines is approved by antitrust authorities, JetBlue Airways has agreed to purchase it for $3.8 billion, making it the fifth-largest airline in the country.
One day after Spirit Airlines’ effort to merge with rival low-cost carrier Frontier Airlines failed, an agreement was reached on Thursday that brought to an end a months-long bidding war.
Ted Christie, the CEO of Spirit, was forced into the embarrassing position of defending a sale to JetBlue after aggressively opposing the agreement and asserting that antitrust authorities would never permit it to take place.
On CNBC, Christie stated that “a lot has been said over the previous few months clearly, always with our stakeholders in mind.” We’ve been talking to JetBlue employees, and they have a lot of interesting ideas about how to proceed with it.
JetBlue CEO Robin Hayes has argued all along that a larger JetBlue would create more competition for the four airlines that control about 80 percent of the US market American, United, Delta and Southwest.
Shares of Spirit, based in Miramar, Florida, rose 3.7 percent after the stock market opened Thursday morning.
JetBlue and Spirit will continue to operate independently until the agreement is approved by regulators and Spirit shareholders, with their separate loyalty programs and customer accounts.
The companies said they expect to conclude the regulatory process and close the transaction no later than the first half of 2024. If that happens, the combined airline would be based in JetBlue’s hometown of New York and led by Hayes. It would have a fleet of 458 planes.
JetBlue said on Thursday that it would pay $33.50 per share in cash for Spirit, including a prepayment of $2.50 per share in cash payable once Spirit stockholders approve the transaction. There is also a ticking fee of 10 cents per share each month starting in January 2023 through closing to compensate Spirit shareholders for any delay in winning regulatory approval.
If the deal does not close due to antitrust reasons, JetBlue will pay Spirit a reverse break-up fee of $70m and pay Spirit shareholders $400m, minus any amounts paid to the shareholders prior to termination.
Spirit and Frontier announced their plan to merge in February, and Spirit’s board stood by that deal even after JetBlue made a higher-priced offer in April. However, Spirit’s board could never convince the airline’s shareholders to go along. A vote on the merger was postponed four times, then cut short Wednesday when Spirit and Frontier announced they were terminating their agreement, which made a Spirit-JetBlue coupling inevitable.
JetBlue anticipated $600m to $700m in annual savings once the transaction is complete. Annual revenue for the combined company was anticipated to be about $11.9bn, based on 2019 revenues.