Market News

JetBlue’s Enticing Offer Compels Spirit to Defer Shareholder Vote

Story Highlights

After delaying vote, will Spirit use the added time to lure shareholders in favor of Frontier’s bid, or will the Board itself turn its decision in favor of JetBlue’s offer?

Florida-based carrier Spirit Airlines (SAVE) has postponed its shareholder meeting on Frontier Group Holdings’ (ULCC) merger vote from this Friday to June 30. The delay comes after the competing bidder, JetBlue Airways (JBLU), further sweetened the deal for Spirit shareholders.

While JetBlue upped its break-up fee to $350 million, Frontier recently added a break-up fee of $250 million. Following the news, JBLU stock closed down 4.2%, SAVE stock ended down 2.3%, and ULCC stock closed down 3.6% on June 8.

Spirit said it needed time to re-evaluate both proposals and take the necessary actions. Although Spirit’s Board is in favor of the Frontier merger, Institutional Shareholder Services Inc. (ISS), a proxy advisory firm, is inclined in favor of creating a low-cost carrier behemoth by joining hands with JetBlue. Meanwhile, another proxy firm, Glass Lewis & Co., is backing the Frontier merger.

Shareholders often draw their votes in concurrence with proxy advisory firms. With ISS favoring JetBlue’s offer, Spirit is taking the time to reconsider the decision and hold talks with shareholders.

Meanwhile, JetBlue is happy with the development and views it as a “necessary first step toward genuine negotiations.” Robin Hayes, JetBlue’s CEO, further added, “Spirit shareholders are clearly urging the Spirit Board to engage with us constructively and provide us with the same information previously made available to Frontier so that we can reach a consensual transaction.”

Wall Street’s Take

Based on five Buys, five Holds, and two Sells, the JBLU stock has a Hold consensus rating. The average JetBlue price target of $14.60 implies 42.7% upside potential to current levels. Meanwhile, its stock has lost 30.4% year to date.

Stock Investors

Following the recent updates, a higher number of retail investors are increasing their exposure to JetBlue. TipRanks’ Stock Investors tool shows that investor sentiment is currently Positive on JetBlue Airways, with 2.2% of portfolios tracked by TipRanks increasing their exposure to JBLU stock over the past 30 days.

Ending Thoughts

The race to become America’s fifth largest airline got even more interesting with Spirit postponing the shareholder vote on the Frontier merger. Could this mean that JetBlue’s revised offer is more promising compared to Frontier’s?

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