JetBlue Lifts Offer for Spirit Airlines, Commits to Selling Assets

Spirit is weighing whether to go ahead with a planned acquisition by

Frontier Group Holdings Inc.

or to accept JetBlue’s offer. The budget airline was supposed to hold a shareholder vote on the

Frontier

deal earlier this month, but postponed it to negotiate with both its suitors.

JetBlue’s move is the latest development in what has become a public negotiation. JetBlue and Frontier both consider Spirit to be important to their ability to grow and go up against the bigger airlines that dominate the industry. Either deal would create the fifth-largest U.S. airline.

JetBlue began its series of offers for Spirit with one worth $33 per share when it swooped in about two months after Spirit and Frontier announced their plans to merge in February. It then launched a tender offer for Spirit’s shares at $30 per share after Spirit rejected JetBlue’s initial gambit.

Spirit last week said it would give both JetBlue and Frontier access to the same due diligence information, addressing a concern JetBlue had raised. Spirit’s board said it expects to complete discussions with both carriers ahead of the shareholder meeting scheduled for June 30.

Robin Hayes,

JetBlue’s chief executive, said the carrier had grown more confident in the deal after completing its due diligence review and holding discussions with Spirit’s management. He said JetBlue’s revised offer was being submitted at the request of Spirit’s board.

“The dialogue and information provided strengthened our conviction,” Mr. Hayes wrote to Spirit’s board Monday, outlining the terms of the new $3.64 billion offer. Frontier’s offer of stock and cash was valued at $2.9 billion when it was announced, but that had declined along with the price of Frontier’s shares.

Mr. Hayes said he still wants to reach a “friendly, negotiated agreement,” but would continue the campaign to persuade shareholders to vote against the Frontier deal if Spirit doesn’t agree that JetBlue has put forward the superior offer.

JetBlue had previously said it would be willing to shed assets to persuade regulators to sign off on the deal. It said Monday that its latest offer “significantly increases” the divestitures it would be willing to commit to in order to obtain regulatory approval.

Spirit said Monday it had received the revised proposal and will evaluate it.

Frontier didn’t immediately respond to a request for comment.

William Franke,

Frontier’s chairman, told The Wall Street Journal earlier this month that Frontier had made a fair offer and that he had no immediate plans to increase it.

Spirit had repeatedly rejected JetBlue’s advances, saying that even though its bid was higher than the value of Frontier’s mostly stock offer, it believed that the JetBlue merger stood little chance of being approved by regulators.

JetBlue has been persistent in trying to persuade Spirit investors to back out of the Frontier merger and has gained support from Institutional Shareholder Services Inc., an influential proxy advisory firm that has recommended against the Frontier merger. ISS reasoned that even if the JetBlue deal faces greater potential challenges, JetBlue’s offer also provides more compensation if regulators block it.

Frontier added a $250 million reverse termination fee to its offer, but JetBlue quickly countered with a $350 million breakup fee and a pledge to pay some of that up front in a special dividend. JetBlue’s latest offer of $33.50 per share includes the same provision to pay a portion of the breakup fee, or $1.50 per share, when the deal closes.

Write to Alison Sider at [email protected]