Spirit Airlines rejects JetBlue takeover bid, will pursue merger with Frontier
Thanks, but no thanks.
That’s the message Spirit sent to JetBlue on Monday morning, saying it would reject the latter's takeover bid and proceed with a previous deal to merge with fellow ultra-low-cost carrier Frontier Airlines.
In rejecting JetBlue’s overture, Spirit raised concerns that the deal “is not reasonably capable of being consummated.”
Spirit’s announcement came shortly after a JetBlue statement that detailed divestitures and other remedies it planned to help win approval for its bid for Spirit. JetBlue formally sent those enhancements to Spirit on Friday.
A key sticking point for JetBlue in this deal would be its Northeast Alliance with American Airlines. The alliance consists of codesharing, loyalty program reciprocity and other steps to streamline the ground experience in markets like New York and Boston. The NEA, as it is known in the industry, is already facing a lawsuit from the Department of Justice, which both airlines have vowed to fight.
As part of its follow-up offer, JetBlue is proactively offering to divest itself of Spirit's assets in New York and Boston in an effort to satisfy regulators. JetBlue also said that it would also include some gates and other assets elsewhere, including at Fort Lauderdale-Hollywood International (FLL), which would be the largest airport of the combined airline, at about 50% market share.
American Airlines declined to comment.
The JetBlue deal also now includes a $200 million breakup fee, money that JetBlue would pay to Spirit if the deal does not pass antitrust muster.
For now, Spirit said it would focus on closing a deal with Frontier – a tie-up that would create a giant ultra-low-cost carrier capable of competing with the “big four” airlines on a nationwide scale.
"Spirit continues to believe in the strategic rationale of the proposed merger with Frontier and is confident that it represents the best opportunity to maximize long-term shareholder value," Mac Gardner, chairman of the board of directors for Spirit Airlines, said in a statement. “After a thorough review and extensive dialogue with JetBlue, the Board determined that the JetBlue proposal involves an unacceptable level of closing risk that would be assumed by Spirit stockholders.
More: 3 reasons JetBlue’s bid for Spirit could raise red flags for regulators
“We believe that our pending merger with Frontier will start an exciting new chapter for Spirit and will deliver many benefits to Spirit shareholders, Team Members and Guests,” Gardner added in the statement.
In a message on Monday to Frontier employees, CEO Barry Biffle called the development "exciting."
"Good news – we are moving ahead with our combination with Spirit," Biffle wrote. "This morning, Spirit announced that its board of directors unanimously reiterated its support for the combination of Frontier and Spirit and determined not to proceed with JetBlue’s proposal."
In choosing a merger with Frontier over JetBlue's cash bid, Spirit's board is going with a safer bet, albeit a lower value one, said Henry Harteveldt, a former airline executive and president of Atmosphere Research.
"Spirit is taking a safe choice here," Harteveldt told TPG in an interview. "Their statement is that they feel there's too much risk associated with the JetBlue proposal, especially when combined with JetBlue's appeal to DOJ to get the Northeast Alliance approved. So they are going with the lower value — but in their opinion — safer option, Frontier."
In recent weeks, there were some early signs that Spirit might be choosing Frontier over JetBlue.
On April 14, it was announced that the Justice Department had begun its review of the Spirit-Frontier merger under the Hart-Scott-Rodino Act, a procedural step for transactions of this size.
During Frontier's earnings call on Thursday, Biffle said that its signed merger agreement remained in effect. Also last week, Spirit had scheduled its first-quarter earnings call for this coming Thursday, a possible sign of an impending announcement.
Even as Spirit and Frontier now turn their focus to closing their merger, JetBlue might not be done yet, Harteveldt said.
"What will be interesting to see is if JetBlue turns this into a hostile bid," he said. "How badly does JetBlue want Spirit? Would they try to go to stockholders directly to appeal to them, especially the institutional stockholders?"
Additional reporting by Ben Mutzabaugh.
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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- Annual Fee is $325.
- Terms Apply.
Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
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Intro Offer
You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.