JetBlue Proposes Acquisition of Spirit for $3.6B

JetBlue submitted a proposal to the board of directors of Spirit Airlines to acquire Spirit for $33 per share in cash, implying a fully diluted equity value of $3.6 billion and providing full and certain value to Spirit shareholders. The proposal represents a premium of 52% to Spirit’s undisturbed share price on Feb. 4 and a premium of 50% to Spirit’s closing share price on April 4. JetBlue firmly believes its proposal constitutes a “superior proposal” compared with Spirit’s merger agreement with Frontier Airlines and represents the most attractive opportunity for Spirit’s shareholders.

JetBlue has approximately $2.8 billion of cash on hand as of Dec. 31, 2021, and has a variety of unencumbered assets available to finance, worth approximately $9 billion in aggregate. JetBlue intends to fund the transaction with cash on hand and debt financing led by Goldman Sachs.

“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” Robin Hayes, CEO of JetBlue, said. “When we grow and introduce our unique value proposition onto new routes, legacy carriers lower their fares and customers win with more choice. The combination of JetBlue and Spirit, coupled with the incredible benefits of our Northeast alliance with American Airlines, would be a game-changer in our ability to deliver superior value on a national scale to customers, crewmembers, communities and shareholders. The transaction would accelerate our strategic growth and create sustained, long-term value for the stakeholders in both companies.”

In the 22 years since JetBlue first brought low fares to New York, airline mergers have created a landscape in which the four largest U.S. carriers control more than 80% of the domestic market. According to JetBlue, the combination of JetBlue and Spirit would create the fifth largest domestic airline, better positioning it on a national level as a customer-centric, low-fare alternative to the dominant “big four” airlines.

“While JetBlue and Spirit are different in many ways, we also have much in common, including a focus on keeping our costs low so we can profitably expand and offer an attractive alternative to the dominant ‘big four’ airlines. We would conduct a full review of Spirit’s product offering, operational and customer technology, and talent pool to optimize the combined airline,” Hayes said.

The combined company would maintain the JetBlue brand and continue to be based in New York City. The combined network would serve more than 77 million customers annually on more than 1,700 daily flights to more than 130 destinations in 27 countries from Peru to the UK.

The proposed transaction is expected to deliver $600 million to $700 million in net annual synergies once integration is complete, driven in large part by expanded customer offerings resulting from the greater scale of the network. The combined airline is projected to have annual revenues of approximately $11.9 billion based on 2019 revenues. JetBlue expects the transaction to be accretive to earnings per share in the first full year, excluding integration costs.

The execution of a definitive merger agreement between JetBlue and Spirit would be subject to approval by each company’s board of directors, and completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of Spirit’s shareholders.

Goldman Sachs is serving as JetBlue’s financial advisor on this transaction and Shearman & Sterling is serving as JetBlue’s legal advisor.

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