It’s big week for those of you who care about the future of Spirit Airlines. The shareholder vote on the Frontier merger comes this Friday, so the jockeying for position has really stepped up. First, Frontier sweetened its bid and now JetBlue is back doing the same, each getting more and more clever as they go. It’s like watching the horses come around the stretch, but like, there are two horses holding hands and the other is chasing behind. Ok, so maybe it’s not like horse racing at all.
For a little while it looked like we were going to get to the Spirit shareholder vote approving or rejecting the merger with Frontier this Friday without much changing in the two offers. But last week, things escalated quickly.
A proxy advisory company called ISS put out a recommendation that Spirit shareholders turn down the Frontier deal. Effectively, ISS asked shareholders the important question… “are you insane?”
This wasn’t great news for Spirit. It quickly responded saying that the Frontier deal was still the best option. Further, it said that “ISS appears overfocused on the absence of a reverse termination fee in that deal.” Spirit also focused on the fact that even if a JetBlue deal gets done, it would take up to 2 years or more for the approval to come through, so the shareholders wouldn’t see money for a long time… if ever.
Do you want to guess what happened next? Oh, you already know. Frontier and Spirit magically came out with an amended offer that included a $250 million reverse termination fee, or $2.23 per share. That’s $50 million above JetBlue’s reverse termination fee. Problem solved, right? That was the biggest objection, so now all is well? Hahahahaha, no.
JetBlue is really just not willing to give up on its dream of dressing all those pilots in blue, so yesterday the airline put out an amended offer sweetening the deal. JetBlue has now upped its reverse termination fee to $350 million, or $3.20 a share. That’s a big increase, but what about that whole timing issue? Well, don’t you worry about that. JetBlue is now offering to give $164 million — $1.50 a share — of that fee right up front. If they take the deal, shareholders will get it as a special dividend right after voting to do the deal with JetBlue.
Of course, Spirit shareholders aren’t even voting on that offer on Friday. They are simply voting on the Frontier deal. If it’s a yes on that, the JetBlue deal is dead. If it’s a no, well, then everything is back on the table again. JetBlue is just trying to make it interesting enough that people will vote no on Frontier.
With this latest offer, JetBlue is really going with the full court press. In its press release, it included a letter to the Spirit board which said “don’t be dumbasses, people.” I mean, it more or less said that. The letter actually ended with (emphasis JetBlue’s):
Accepting our Improved Proposal is in the best interests of your stockholders, and we urge you to immediately engage with us in good faith to finalize definitive documentation with JetBlue reflecting the terms of our Improved Proposal.
But that’s not all. JetBlue also is now trying to do an end-run around the owners and go straight to the people… the employees… or crewmembers… or castmembers? I can’t remember what JetBlue calls them. Anyway, not only did it send them an open letter, JetBlue CEO Robin Hayes also did a little video.
Basically, Robin says “be cool, my babies. We aren’t gonna kick you to the curb.” In other words, Robin is telling them they will grow together, they won’t furlough people, and all will be great in the land of Spueit. Also, you can nonrev to London and Peru! (I’m not kidding, that’s in there.) Maybe some of those employee shareholders at Spirit will be swayed. Or maybe not.
With three days to go until the vote, Spirit’s board says it is reviewing the offer, but it seems highly unlikely that a new conclusion will be reached. I look forward to seeing who makes the next move in this game of chess. Yeah, chess… that seems like a better metaphor than horse-racing.