JetBlue’s proposal offers Spirit’s shareholders
and other stakeholders more value, more certainty and more
opportunity
Spirit’s conflicted Board rejected JetBlue’s
clearly superior offer on baseless grounds and refused to engage
constructively – depriving Spirit shareholders of more value and
more certainty
Spirit’s antitrust rationale is a smokescreen
to distract from the fact that its merger with Frontier faces
similar regulatory risk, yet offers no shareholder protections
JetBlue files “Vote No” proxy statement for
Spirit special meeting and commences all-cash fully financed tender
offer to acquire Spirit at new price of $30 per share
JetBlue (NASDAQ: JBLU) today announced that it has filed a “Vote
No” proxy statement urging Spirit (NYSE: SAVE) shareholders to vote
AGAINST the inferior, high risk, and low value Spirit/Frontier
transaction at Spirit’s upcoming special meeting.
In addition, JetBlue commenced an all-cash, fully financed
tender offer to acquire all of the outstanding shares of Spirit for
$30 per share, without interest and less any required withholding
taxes. Given the Spirit Board of Directors’ complete unwillingness
to share the same necessary diligence information that was shared
with Frontier, JetBlue is now offering to acquire Spirit for $30
per share in cash through a fully financed tender offer. This
represents a 60% premium to the value of the Frontier transaction
as of May 13, 2022 – a very compelling offer and higher than the
premium implied by JetBlue’s original proposal. JetBlue is fully
prepared to negotiate in good faith a consensual transaction at
$33, subject to receiving necessary diligence.
JetBlue launched a website at www.JetBlueOffersMore.com and
issued a letter to Spirit shareholders detailing the benefits of
its transaction, the certainty of closing, and the misleading
statements made by Spirit. In the letter, JetBlue CEO Robin Hayes
states:
“JetBlue offers more value – a significant premium in cash –
more certainty, and more benefits for all stakeholders. Frontier
offers less value, more risk, no divestiture commitments, and no
reverse break-up fee, despite more overlap on non-stop routes and
their own regulatory challenges."
“Yet the Spirit Board failed to provide us the necessary
diligence information it had provided Frontier and then summarily
rejected our proposal, which addressed its regulatory concerns,
without asking us even a single question about it. The Spirit Board
based its rejection on unsupportable claims that are easily
refuted."
“Ask yourself a simple question: why won’t the Spirit Board
engage with us constructively? The interests of Bill Franke’s
Indigo Partners and the long-standing relationships between the two
companies is the obvious answer.”
The letter goes on to note that JetBlue’s current proposal still
offers more value and certainty for Spirit shareholders than
Frontier, and stresses that the company is prepared to engage on
the basis of its original proposal, if the Spirit Board acts in
good faith:
“Based on the clear superiority of our offer, we expected the
Spirit Board to engage constructively. Given its unwillingness to
share necessary information or negotiate in good faith, we adjusted
our price accordingly, but will work towards a consensual
transaction at $33 per share, subject to receiving the information
to support it.”
The full letter follows:
May 16, 2022
Dear Spirit Shareholder,
You have an important choice to make about your investment in
Spirit Airlines.
We believe the Spirit Board of Directors (the “Spirit Board”)
has failed to act in your best interests by refusing to engage
constructively on our clearly superior proposal to acquire
Spirit.
JetBlue offers more value – a significant premium in cash –
more certainty, and more benefits for all stakeholders. Frontier
offers less value, more risk, no divestiture commitments, and no
reverse break-up fee, despite more overlap on non-stop routes and
their own regulatory challenges.
Yet the Spirit Board failed to provide us the necessary
diligence information it had provided Frontier and then summarily
rejected our proposal, which addressed its regulatory concerns,
without asking us even a single question about it. The Spirit Board
based its rejection on unsupportable claims that are easily
refuted.
Ask yourself a simple question: why won’t the Spirit Board
engage with us constructively? The interests of Bill Franke’s
Indigo Partners and the long-standing relationships between the two
companies is the obvious answer.
Given the Spirit Board’s unjustified refusal to engage, we
have decided to bring our proposal directly to the Spirit
shareholders, and we urge you to vote “AGAINST” the Frontier
transaction at Spirit’s upcoming special meeting. This will
send a message to the Spirit Board that you want it to negotiate
with us in good faith. We also launched an all-cash, fully
financed tender offer to purchase all the outstanding shares of
common stock at $30.00 per share and we encourage you to
underscore your message to Spirit’s Board by tendering your shares
into our offer. If the Spirit shareholders vote against the
transaction with Frontier and compel the Spirit Board to negotiate
with us in good faith, we will work towards a consensual
transaction at $33 per share, subject to receiving the information
to support it.
Our current proposal offers:
- More value and more certainty for Spirit shareholders with
our ALL-CASH offer. JetBlue offers you $30 per share in cash,
representing a 60% premium to the value of the Frontier transaction
as of May 13, 20221, a 77% premium to Spirit’s latest closing
price2, and a 38% premium to Spirit’s unaffected share price3 – a
very compelling value, and, no matter how you measure it, a higher
premium than in our original proposal.
- Even more value potential after diligence and good faith
negotiation. Based on the clear superiority of our offer, we
expected the Spirit Board to engage constructively. Given its
unwillingness to share necessary information or negotiate in good
faith, we adjusted our price accordingly, but will work towards a
consensual transaction at $33 per share, subject to receiving the
information to support it.
- More regulatory certainty through our divestiture
commitment and $200 million reverse break-up fee.
In contrast, the proposed Frontier transaction offers Spirit
shareholders LESS:
- Less value. Our current proposal represents a compelling
60% premium to the value of the Frontier transaction as of May 13,
2022.
- Less value certainty. Frontier’s stock price has
declined 30% since the announcement of the Frontier
transaction4, resulting in approx. $770 million decrease
in the value of the Frontier transaction to you. Plus, the
future value of the Frontier / Spirit combined company’s stock
is uncertain, especially in a continually challenging
operational and market environment. Spirit’s and Frontier’s
projections underpinning their transaction are based on flawed
assumptions, including with respect to personnel attrition and
wage inflation.
- Less regulatory commitments and less closing certainty.
Despite having a similar regulatory profile to JetBlue,
Frontier offers no divestiture commitment or reverse break-up
fee.
JetBlue Offers More Value and Certainty
to Spirit Shareholders – in Any Scenario...
Our current proposal provides superior value to the Frontier
offer, regardless of whether either transaction is completed.
- When we complete our proposed transaction, Spirit shareholders
would receive at least $30.00 per share in cash, compared to
$18.815 per share from the Frontier transaction.
- In the unlikely event our proposed transaction is not
consummated, Spirit shareholders will receive a reverse break-up
fee of approximately $1.83 per share, compared to no break-up fee
in the Frontier transaction. We estimate that translates into total
economic value of approximately $17 per share from JetBlue against
approximately $15 in the Frontier transaction6.
… And Better Trading Value in the Short
Term.
In addition, we expect the outcome of the Spirit special meeting
to influence how the Spirit shares will trade in the short term.
Based on the trading patterns since the Frontier transaction was
announced, we expect that, if the transaction is approved,
Spirit’s shares will trade at approximately $177. On the other hand, based on what
we observed since our proposal became public, if the Frontier
transaction is rejected, we expect Spirit shares to trade between
approximately $23.1 and $25.58, at
least a 36% premium to Spirit’s latest closing share
price9.
Transaction Does Not
Close
Transaction Closes
Short Term Trading Depending
on Meeting Outcome
Frontier Transaction
~15
~19
~17
JetBlue Transaction
~17 (including RBF of
1.83/share)
30-33
~23-25
A vote AGAINST the Frontier transaction is a vote for a
higher Spirit share price, regardless of any consideration
concerning the actual consummation of either transaction. A vote
for the Frontier transaction is a vote for a lower Spirit share
price.
JetBlue Is Confident We Will Obtain
Regulatory Approval.
A combined JetBlue-Spirit will create a more compelling and
viable competitor to the Big Four airlines that control more than
80% of the U.S. market. JetBlue’s entry into new routes triggers
fare decreases from legacy airlines that are more significant than
those resulting from ultra-low-cost carriers; this phenomenon has
been described as the “JetBlue Effect”.
Our recent economic analysis, using Department of
Transportation Data, shows JetBlue’s presence on a nonstop route
decreases legacy fares by ~16%, about three times as much as the
presence of an ultra-low-cost carrier. This phenomenon is well
established and foundational to JetBlue’s business model.
We are not the only ones who cite the JetBlue Effect. Coined by
an MIT study in 2013, the JetBlue Effect has been acknowledged
by the Department of Justice (DOJ) as recently as 2021 when it
said, “JetBlue’s reputation for lowering fares is so well known in
the airline industry that it has earned a name: the ‘JetBlue
Effect.’ JetBlue’s record in Boston and New York illustrates
why.”
We are confident we can address any regulatory concerns the
Spirit Board, regulators or courts may have through:
- JetBlue’s expedited expansion and the resulting net fare
decreases;
- demonstrated ease of other ultra-low-cost carriers’ continued
expansion; and
- the divestitures we are prepared to undertake.
Don’t Be Misled: Spirit’s Transaction
with Frontier Has Similar Regulatory Risk.
- Both transactions would create the #5 player with very similar
market share. A combined JetBlue and Spirit would have an 8% market
share based on full year 2021 seats compared to 7% for a combined
Frontier and Spirit.
- Frontier overlaps with Spirit on significantly more nonstop
routes (104) than JetBlue (54)10, and JetBlue has less overlap in
flights, seats, and ASMs than Frontier in the metropolitan areas
served by both11.
Spirit’s Suggestion that Our Northeast
Alliance Is a Regulatory Obstacle Has No Basis in Fact or in
Law.
JetBlue’s Northeast Alliance is already demonstrating its
positive benefits for customers in the Northeast. Regardless of
what one thinks of the Northeast Alliance, it is irrelevant to our
ability to complete the acquisition of Spirit.
- The Northeast Alliance is a
limited, procompetitive alliance with American Airlines focused on
unlocking growth for JetBlue in one of the nation’s most
constrained geographies, the Northeast US. The alliance creates a
compelling third competitor in a market previously dominated by two
players and has already started delivering benefits to
consumers.
- Divestitures: We will
proactively offer the DOJ a remedy
package that contemplates the divestiture of all Spirit
assets located in the area covered by the Northeast Alliance (New
York and Boston) so, as a result of our proposed transaction, we
will not increase our presence in these airports.
- The Northeast Alliance
litigation will go to trial this September, and we
believe the outcome of that trial will not impact the outcome of
the regulatory process for the acquisition of Spirit, which will
likely take place later. If the court allows the DOJ to block the
Northeast Alliance, by definition it will not be an obstacle to the
acquisition of Spirit. If we are successful in defending the case,
as we think we will be, it will be a testament that the alliance is
procompetitive, disproving Spirit’s claim. In either case, the Northeast Alliance litigation does
not impact JetBlue’s ability to acquire Spirit.
Given the clear superiority of our offer, including the
regulatory commitments we have made to back up our high confidence
in our ability to complete our transaction, why hasn’t the Spirit
Board engaged?
Clearly because Spirit’s Board is prioritizing its own
self-interest and personal relationships with Frontier over its
shareholders’ interests.
There is good reason to believe the Spirit Board is not acting
in the best interests of its own shareholders.
- Multiple Spirit directors involved in the decision to merge
with Frontier have significant ties to Bill Franke, who appointed
each to the Spirit Board when he was chairman of Spirit, and while
Indigo Partners (the current controlling shareholder of Frontier)
was a large shareholder of Spirit.
- This includes McIntyre Gardner, current chairman of Spirit, who
replaced Mr. Franke, current chairman of Frontier, both of whom led
the negotiations between the two companies.
- 5 of the 8 Spirit directors will continue as Board members of
the Frontier / Spirit combined company if the Frontier transaction
is consummated.
After eight months of discussions, Spirit
agreed to an inferior transaction with Frontier without
considering what other alternatives were available to Spirit’s
shareholders. Further, the outsized
concessions to Frontier by the Spirit Board do not reflect a
meaningful effort to maximize shareholder value.
- The final terms of the Frontier transaction reflected only an
18.9% premium to the Spirit share price at the time of the
announcement12, compared to an average premium in precedent airline
transactions of 86%13.
- The final value of the Frontier transaction reflected only an
approximate 6% increase from the terms initially offered by
Frontier14.
- The original value of the Frontier transaction of $25.83 per
share was significantly below the standalone value resulting from
the discounted cash flow analysis of Spirit’s financial
advisors15.
- Frontier is not providing any divestiture commitment or a
reverse break-up fee. The absence of both means that despite obvious hurdles for its own transaction,
Frontier, at its own option, could simply decline to make any
regulatory concessions and abandon the Frontier transaction at no
cost (or compensation to Spirit or its shareholders).
Since our original proposal was made, the Spirit Board
consistently refused to engage constructively with us.
- On April 7, the Spirit Board determined that our original
proposal could reasonably be expected to lead to a “Superior
Proposal”; and yet, it refused to provide the limited diligence
information we requested which it had already provided to
Frontier.
- On April 25, the Spirit Board requested we agree to
unprecedented contractual terms as a precursor to sharing the
diligence information we had originally requested.
- These demands were off-market and contrasted starkly to the
limited regulatory commitments made by Frontier, a transaction with
a similar regulatory profile.
- On April 29, we presented an enhanced proposal, which was
responsive to the concerns of the Spirit Board on closing certainty
and included regulatory commitments representing a significant
improvement from those offered by Frontier.
- Two days later, the Spirit Board rejected our enhanced
proposal, without ever contacting us to discuss it, and, according
to its own proxy, without considering the clearly superior
economics.
By refusing to engage on our original
proposal, the Spirit Board has deprived its shareholders of the
most attractive value creating opportunity available to
them.
WE URGE YOU TO SEND A MESSAGE TO THE
SPIRIT BOARD BY VOTING “AGAINST” ALL PROPOSALS RELATED TO THE
FRONTIER TRANSACTION AT THE SPIRIT SPECIAL MEETING ON JUNE 10, 2022
AND TENDERING YOUR SHARES INTO OUR OFFER.
In addition to voting “AGAINST” the Frontier transaction at the
Spirit Special Meeting, we urge all Spirit shareholders voting
against the Frontier transaction to exercise their appraisal rights
under Section 262 of the Delaware General Corporation Law, which
entitles Spirit shareholders who perfect these rights to the fair
value of their shares, as determined by a Delaware court. Spirit,
by admission of its own financial advisors, is worth more than the
value of the Frontier transaction and this and the superior value
of our current proposal, as well as our original proposal, would be
factors used by the court in determining fair value of your shares.
If the Spirit Board continues to refuse to negotiate with us and
the Frontier transaction is approved, appraisal is the only way to
capture the value included in our proposals. Please consult your
legal advisor before exercising appraisal rights.
Additional details about JetBlue’s superior offer can be found
at JetBlueOffersMore.com.
Protect Your Own Best
Interests
Our proposal represents a compelling opportunity to receive a
significant premium in cash, with greater value and certainty than
the Frontier transaction. Spirit’s Board has prevented you from
receiving it.
We are fully committed to pursuing our original $33 per share
proposal. We urge you to protect your own best interests. Let the
Spirit Board know you want the opportunity to receive our superior
offer by voting AGAINST the Frontier transaction and
tendering your shares in our cash tender offer.
Sincerely, Robin Hayes Chief Executive Officer
Advisors
Goldman Sachs & Co. LLC is serving as JetBlue’s financial
advisor and Shearman & Sterling LLP is serving as JetBlue’s
legal advisor. Goldman Sachs Bank USA and Bank of America, N.A. are
providing committed debt financing for the tender offer.
Forward Looking Statements
Statements in this press release contain various forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
which represent our management’s beliefs and assumptions concerning
future events. These statements are intended to qualify for the
“safe harbor” from liability established by the Private Securities
Litigation Reform Act of 1995. When used in this press release, the
words “expects,” “plans,” “anticipates,” “indicates,” “believes,”
“forecast,” “guidance,” “outlook,” “may,” “will,” “should,”
“seeks,” “targets” and similar expressions are intended to identify
forward-looking statements. Forward-looking statements involve
risks, uncertainties and assumptions, and are based on information
currently available to us. Actual results may differ materially
from those expressed in the forward-looking statements due to many
factors, including, without limitation, those listed in our U.S.
Securities and Exchange Commission (“SEC”) filings, matters of
which we may not be aware, the coronavirus pandemic including new
and existing variants, the outbreak of any other disease or similar
public health threat that affects travel demand or behavior, the
outcome of any discussions between JetBlue Airways Corporation
(“JetBlue”) and Spirit Airlines, Inc. (“Spirit”) with respect to a
possible transaction, including the possibility that the parties
will not agree to pursue a business combination transaction or that
the terms of any such transaction will be materially different from
those described herein, the conditions to the completion of the
possible transaction, including the receipt of any required
stockholder and regulatory approvals and, in particular, our
expectation as to the likelihood of receipt of antitrust approvals,
JetBlue’s ability to finance the possible transaction and the
indebtedness JetBlue expects to incur in connection with the
possible transaction, the possibility that JetBlue may be unable to
achieve expected synergies and operating efficiencies within the
expected timeframes or at all and to successfully integrate
Spirit’s operations with those of JetBlue, and the possibility that
such integration may be more difficult, time-consuming or costly
than expected or that operating costs and business disruption
(including, without limitation, disruptions in relationships with
employees, customers or suppliers) may be greater than expected in
connection with the possible transaction. Given the risks and
uncertainties surrounding forward-looking statements, you should
not place undue reliance on these statements. Further information
concerning these and other factors is contained in JetBlue’s SEC
filings, including but not limited to, JetBlue’s 2021 Annual Report
on Form 10-K and its Quarterly Reports on Form 10-Q. In light of
these risks and uncertainties, the forward-looking events discussed
in this press release might not occur. Our forward-looking
statements speak only as of the date of this press release or as of
the dates so indicated. We undertake no obligation to update or
revise forward-looking statements, whether as a result of new
information, future events, or otherwise.
Additional Important Information and Where to Find It
This press release is provided for informational purposes only
and is neither an offer to purchase nor a solicitation of an offer
to sell any shares of the common stock of Spirit or any other
securities. JetBlue and its wholly-owned subsidiary, Sundown
Acquisition Corp., have commenced a tender offer for all
outstanding shares of common stock of Spirit and have filed with
the SEC a tender offer statement on Schedule TO (including an Offer
to Purchase, a Letter of Transmittal and related documents), as may
be amended. These documents contain important information,
including the terms and conditions of the tender offer, and
stockholders of Spirit are advised to carefully read these
documents before making any decision with respect to the tender
offer.
Investors and security holders may obtain free copies of these
statements and other documents filed with respect to the tender
offer at the SEC’s website at https://www.sec.gov. In addition,
copies of the tender offer statement and related materials may be
obtained for free by directing such requests to the information
agent for the tender offer, Innisfree M&A Incorporated, at
(877) 800-5190 (toll free for stockholders) or (212) 750-5833
(collect for banks and brokers).
JetBlue has filed a preliminary proxy statement on Schedule 14A
with the SEC (“Preliminary Proxy Statement”) and the accompanying
BLUE proxy card on May 16, 2022 to be used to solicit proxies in
opposition to the proposed business combination between Spirit and
Frontier Group Holdings, Inc. (“Frontier”) and the other proposals
to be voted on by Spirit stockholders at the special meeting of the
stockholders of Spirit to be held on June 10, 2022. JetBlue intends
to file other relevant materials with the SEC, including a proxy
statement in definitive form (the “Proxy Statement”). This press
release is not a substitute for the Proxy Statement or any other
document JetBlue, Spirit or Frontier may file with the SEC in
connection with the proposed transaction.
STOCKHOLDERS OF SPIRIT ARE URGED TO READ THE PRELIMINARY
PROXY STATEMENT, THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND
ALL OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain a free copy of the
proxy statement and other documents filed by JetBlue at the SEC’s
website at https://www.sec.gov or by contacting the information
agent for the proxy solicitation, Innisfree M&A Incorporated,
at (877) 800-5190 (toll free for stockholders) or (212) 750-5833
(collect for banks and brokers).
Participants in Solicitation
JetBlue and its directors and executive officers may be deemed
to be participants in the solicitation of proxies from the holders
of Spirit common stock. Additional information regarding the
participants in the proxy solicitation is contained in the
Preliminary Proxy Statement.
About JetBlue
JetBlue is New York's Hometown Airline®, and a leading carrier
in Boston, Fort Lauderdale-Hollywood, Los Angeles, Orlando, and San
Juan. JetBlue carries customers across the United States, Caribbean
and Latin America, and between the U.S. and London. For more
information, visit JetBlue.com.
__________________________________ 1 Represents premium over
$18.81, the implied value of Frontier transaction as of May 13,
2022, based on Frontier’s $8.72 closing share price as of May 13,
2022 and the terms of the Agreement and Plan of Merger, dated as of
February 5, 2022 (the “Frontier Agreement”), among Top Gun
Acquisition Corp., Frontier Group Holdings and Spirit Airlines. 2
Represents premium over Spirit’s $16.98 closing share price on May
13, 2022. 3 Represents premium over Spirit’s $21.73 closing share
price on February 4, 2022. 4 Represents decline from Frontier’s
$12.39 closing share price as of February 4, 2022 to $8.72 closing
share price as of May 13, 2022. 5 Represents the implied value of
Frontier transaction as of May 13, 2022, based on Frontier’s $8.72
closing share price as of May 13, 2022 and the terms of the
Frontier Agreement. 6 Estimated as Spirit’s hypothetical unaffected
share price, by applying Frontier’s share price performance between
February 4, 2022 and May 13, 2022 to Spirit’s $21.73 closing share
price on February 4, 2022, and, in the case of our proposal, by
adding the value of the reverse break-up fee per share. 7 Estimated
by applying the average percentage difference between the Spirit
closing share price and the value of the Frontier transaction
between February 4, 2022 and April 4, 2022 (the latest trading day
before our proposal was made public) to the $18.81 implied value of
Frontier transaction as of May 13, 2022. 8 Low end of the range
estimated applying the average spread between $33 and Spirit’s
closing share price between April 5, 2022 (when our proposal was
made public) and April 29, 2022 (the last trading day before our
proposal was rejected by the Spirit Board) to $30; high end of the
range estimated with reference to Spirit’s average closing share
price between April 5, 2022 and April 29, 2022. 9 Represents
premium over Spirit’s $16.98 closing share price on May 13, 2022.
10 Based on 2021 domestic Department of Transportation Data. 11
Based on scheduled flights/seats/ASMs for 2021 including
international routes. 12 Represents premium of the value of the
Frontier transaction of $25.83 to Sprit’s $21.73 closing price on
February 4, 2022. 13 Reflects median premium to unaffected price of
target in precedent Low Cost Carrier transactions (WestJet-Onex,
Virgin America-Alaska, AirTran-Southwest, ExpressJet-Skywest,
Midwest Air/TPG & Northwest). 14 Estimated based on the events
occurred on December 15, 2021, described in “Background of the
Merger” section of the Spirit Definitive Proxy Statement filed on
May 11, 2022. 15 Based on the “Spirit DCF Range” of $34.00 to
$64.00 per Spirit share included in the “Opinion of Barclays
Capital Inc,” and Spirit Discounted Cash Flow Analysis resulting in
$33.00 to $55.50 range of implied equity value per Spirit common
stock, included in the “Opinion of Morgan Stanley & Co. LLC”
sections of the Spirit Definitive Proxy Statement filed on May 11,
2022.
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JetBlue Corporate Communications Tel: +1.718.709.3089
corpcomm@jetblue.com
JetBlue Investor Relations Tel: +1 718 709 2202
ir@jetblue.com
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