On Monday, JetBlue Airways Corp. (JBLU.O) worked on its offer for Spirit Airlines Inc. (SAVE.N) on Monday. This raised the stakes in the bidding war for the low-cost carrier, whose investors will vote this week on a merger agreement with Frontier Group Holdings Inc. (ULCC.O).
JetBlue raised the cost of separating from Spirit by $150 million, bringing it to $350 million. This money will be paid to Spirit investors if the deal falls through for antitrust reasons. Soul’s parts stopped everything.
The new offer comes just days after Frontier agreed to pay Spirit a $250 million separation fee.
Under JetBlue’s reevaluated terms, Spirit investors would get $31.50 per share in real money. This includes $30 at the arrangement’s close and a prepayment of $1.50 from a raised opposite separation charge soon after Spirit investors vote to support an arrangement.
So, its proposal is worth $3.4 billion at the moment.
Its investors will decide on Friday whether to accept Frontier’s offer of money and stock, which was first valued at $2.9 billion.
Soul said that its board will look over JetBlue’s new offer and respond at the right time. Investors were asked not to do anything at this point.
U.S. transporters have been working hard to improve their homegrown reputations, but they have been hounded by constant work and plane problems.
With these two deals, the fifth-largest U.S. carrier will be formed.
Soul turned down JetBlue’s deal last month, saying that it had a low chance of being approved by U.S. controllers. This made the New York-based transporter send a hostile takeover bid.
Savanthi Syth, a carrier investigator at Raymond James, said that the new offer is likely to “calm” Spirit investors who are worried that a deal with JetBlue would violate antitrust laws.
In its most recent proposal, JetBlue didn’t suggest that it and American Airlines loosen up their “Upper East Alliance” (NEA).
That was a big deal for Spirit, which has been cautious because of worries about antitrust laws.
In September, the Justice Department sued JetBlue to make the company less strict.
JetBlue CEO Robin Hayes told CNBC that the company had taken on “unusual divestiture responsibilities” to get approval from the government. “We want the Spirit board to think about our deal in a serious way,” he said.
Sources in the business world said that Spirit is still committed to the deal with Frontier, but the company might have to switch sides if it faces more pressure from large institutional investors.
Last week, an intermediary firm called Glass Lewis told Spirit’s financial backers to support the Frontier deal. Another intermediary firm, Institutional Shareholder Services Inc, told them not to.
The new JetBlue offer will cause ISS and Glass Lewis to make changes to their evaluations of the Frontier deal, the sources said.
On Monday, JetBlue also got in touch with Spirit workers and told them they would get better pay and benefits, more jobs, career growth, and no time off.
Soul’s deal with Frontier also guarantees that no jobs will be lost and that 10,000 direct jobs will be added by 2026.