JetBlue agrees to buy Spirit Airlines for $3.8bn

JetBlue Airways has agreed to buy Spirit Airlines for $3.8bn and create the nation’s fifth-largest airline if the deal can win approval from antitrust regulators.

The agreement Thursday capped a months-long bidding war and arrives one day after Spirit’s attempt to merge with fellow budget carrier Frontier Airlines fell apart.

Spirit CEO Ted Christie was thrust into the awkward position of defending a sale to JetBlue after arguing vehemently against the deal, saying that antitrust regulators would never let it happen.

“A lot’s been said over the last few months obviously, always with our stakeholders in mind,” Christie said on CNBC. “We have been listening to the folks at JetBlue, and they have a lot of good thoughts on their plans for that.”

JetBlue CEO Robin Hayes has argued all along that a larger JetBlue would create more competition for the four airlines that control about 80 percent of the US market — American, United, Delta and Southwest.

Shares of Spirit, based in Miramar, Florida, rose 3.7 percent after the stock market opened Thursday morning.

JetBlue and Spirit will continue to operate independently until the agreement is approved by regulators and Spirit shareholders, with their separate loyalty programs and customer accounts.

The companies said they expect to conclude the regulatory process and close the transaction no later than the first half of 2024. If that happens, the combined airline would be based in JetBlue’s hometown of New York and led by Hayes. It would have a fleet of 458 planes.

JetBlue said on 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 is also a ticking fee of 10 cents per share each month starting in January 2023 through closing to compensate Spirit shareholders for any delay in winning regulatory approval.

If the deal does not close due to antitrust reasons, JetBlue will pay Spirit a reverse break-up fee of $70m and pay Spirit shareholders $400m, minus any amounts paid to the shareholders prior to termination.

Spirit and Frontier announced their plan to merge in February, and Spirit’s board stood by that deal even after JetBlue made a higher-priced offer in April. However, Spirit’s board could never convince the airline’s shareholders to go along. A vote on the merger was postponed four times, then cut short Wednesday when Spirit and Frontier announced they were terminating their agreement, which made a Spirit-JetBlue coupling inevitable.

JetBlue anticipated $600m to $700m in annual savings once the transaction is complete. Annual revenue for the combined company was anticipated to be about $11.9bn, based on 2019 revenues.