Just hours after Spirit Airlines walked away from its merger deal with Frontier Airlines, JetBlue secured a deal to takeover the highly-sought after budget carrier for $3.8 billion.
The deal will see Spirit’s assets be rebranded to JetBlue, making it the fifth largest carrier in the United States.
It marks the end of a months-long bidding war between JetBlue and Frontier over the budget airline, after Spirit failed to drum up shareholder support for a merger with Frontier, and terminated negotiations on Wednesday.
The takeover by JetBlue will still need to be approved by regulators, and the deal could be impacted by JetBlue’s existing partnership with American Airlines.
JetBlue said will reportedly pay out $33.50 per share to Spirit’s investors, including a $2.50 per share prepayment if shareholders approve the deal and a 10 cent per month ticking fee starting next year until the deal closes. The sale should be completed in the first half of 2024.
The two airlines hope to consolidate operations and fly under the same operating certificate as soon as early 2025.
The deal will see Spirit’s yellow jets rebranded at JetBlue, with new interiors and seats, which will now include seatback screens and more legroom.
“We have two priorities: one is to get this deal closed and get the airline integrated and build a bigger JetBlue,” JetBlue CEO Robin Hayes said on Thursday. “Secondly to run a reliable operation in the meantime.”
Hayes said after the takeover, nothing will change for New York-based JetBlue, and that Spirit’s Florida office would likely close.
“We have a long-term commitment to New York … and we’re going to stay here.”
Spirit and Frontier had already begun merger negotiations earlier this year when JetBlue jumped in with an all-cash takeover bid, which ultimately derailed Frontier’s efforts.
“Rather than overpay for Spirit, the board prioritised the interest of Frontier, our employees and our shareholders,” Frontier CEO Barry Biffle said on Wednesday, after Spirit announced merger negotiations had ceased.
Spirit last month knocked back JetBlue’s last offer of $34.15 per share, stating the offer was too low, along with concerns over gaining regulatory approval.
When asked why Spirit changed its stance, CEO Ted Christie said: “That merger agreement [with Frontier] is now terminated so that’s a notable change and that leads to where we are today.”
Spirit has to pay Frontier $25 million in merger-related costs because of the terminated agreement, according to Frontier.
