JetBlue agrees to buy Spirit for $3.8 billion
JetBlue has agreed to buy Spirit Airlines for $3.8 billion in a deal that would create the nation’s fifth largest airline if approved by U.S. regulators.
The agreement Thursday comes a day after Spirit’s attempt to merge with Frontier Airlines fell apart. Spirit had recommended its shareholders approve a lower offer from Frontier, saying that antitrust regulators are more likely to reject the bid from JetBlue.
“This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for crewmembers, and expand our platform for profitable growth.” JetBlue CEO Robin Hayes said in a statement.
The combined airline, which will be based in New York and led by Hayes, would have a fleet of 458 aircraft. The airlines will continue to operate independently until after the transaction closes.
At Detroit Metropolitan Airport for the year through June, more than 41,000 passengers have flown JetBlue, according to the Wayne County Airport Authority, while more than 687,000 have flown on Spirit flights.
Spirit Airlines got its start in Michigan, originally as a small charter company in the 1980s known as Charter One. Ned Homfeld grew the operation, according to a Detroit News obituary for him in 2016, adding aircraft and flight destinations, and renamed the company Spirit Airlines.
In 1999, Homfeld moved the company's headquarters from Detroit to Florida.
"We are as good as the majors," Homfeld told The Detroit News in a 2003 interview. "We want to give consumers a product that meets or exceeds that of the major carriers. They now see they have to compete with us."
JetBlue said Thursday that it would pay $33.50 per share in cash for Spirit, including a prepayment of $2.50 per share in cash payable once Spirit stockholders approve the transaction. There’s also a ticking fee of 10 cents per month starting in January 2023 through closing.
If the transaction is completed before December 2023, the deal will be for $33.50 per share, increasing over time to up to $34.15 per share, in the event the transaction closes at the outside date in July 2024.
If the deal doesn’t close due to antitrust reasons, JetBlue will pay Spirit a reverse break-up fee of $70 million and stockholders of Spirit a reverse break-up fee of $400 million less any amounts paid to stockholders of Spirit prior to termination.
JetBlue anticipates $600-700 million in annual savings once the transaction is complete. Annual revenue for the combined company is anticipated to be about $11.9 billion, based on 2019 revenues.
The deal still needs the required regulatory approvals and approval from Spirit’s stockholders. The companies expect to conclude the regulatory process and close the transaction no later than the first half of 2024.