To provide additional certainty following shareholder feedback, JetBlue adds ticking fee; increases reverse breakup fee to $400 million and accelerated prepayment to $2.50 per share

JetBlue urges Spirit shareholders not to be misled by Spirit Board; shareholders can protect their ability to receive JetBlue’s offer by voting ‘No’ at the upcoming Spirit special meeting

NEW YORK-- JetBlue (NASDAQ: JBLU) today announced that it is modifying its proposal to acquire Spirit (NYSE: SAVE) based on discussions with Spirit shareholders, and issued an open letter detailing the benefits of its decisively superior proposal and the recent misleading statements made by Spirit. JetBlue is communicating the modified proposal to Spirit’s Board today.

JetBlue continues to encourage Spirit shareholders to vote AGAINST Frontier’s inferior offer. After engagement and consultation with shareholders and positive investor reaction to the value and certainty of JetBlue’s offer, JetBlue today amended its already superior proposal:

• Increased accelerated prepayment to $2.50 per share, structured as a cash dividend to Spirit shareholders promptly following the Spirit shareholder vote approving the combination between Spirit and JetBlue (subject to CARES Act limitations).

• Enhanced reverse break-up feeof $400 million payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons.

• Addition of a ticking fee mechanism, which would provide shareholders with a monthly prepayment of $0.10 per share between January 2023 and the consummation or termination of the transaction. This represents an estimated aggregate ticking fee of up to $1.80 per share, of which the first $1.15 per share in payments will offset the reverse break-up fee or the merger consideration. Any payments in excess of the $1.15 per share will be incremental to the total purchase price of $33.50 or the reverse break-up fee. This increases the total transaction consideration to up to $34.15 per share in the event the transaction is consummated and total downside protection to $4.30 per share, or approximately $470 million in the aggregate, in the event the transaction is terminated.

“After the Spirit Board’s failure to recognize our decisively superior offer, we’ve discussed our offer directly with Spirit shareholders and are now modifying our proposal in response to shareholders’ expressed interest, to include a monthly payment for shareholders, with the certainty of a significant cash premium at closing,” said Robin Hayes, chief executive officer, JetBlue. “Spirit shareholders should not be misled by Spirit and Frontier’s rosy projections of a potential future stock price, which are based on highly flawed assumptions that fail to account for the actual market conditions, including the need for pilot pay increases and elevated fuel costs. The entrenched Spirit Board has approved a revised deal that is ultimately better for Frontier and its controlling shareholder than it is for Spirit shareholders.”

The full letter follows:

Dear Spirit Shareholders,

After the conflicted Spirit Board failed to recognize our decisively superior proposal, we have continued to engage with shareholders who are supportive of our superior proposal and we are now modifying our already superior proposal with the following:

• Increased accelerated prepayment to $2.50 per share, structured as a cash dividend to Spirit shareholders promptly following the Spirit shareholder vote approving the combination between Spirit and JetBlue (subject to CARES Act limitations).

• Enhanced reverse break-up feeof $400 million payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons.

• Addition of a ticking fee mechanism, which would provide shareholders with a monthly prepayment of $0.10 per share between January 2023 and the consummation or termination of the transaction. This represents an estimated aggregate ticking fee of up to $1.80 per share, of which the first $1.15 per share in payments will offset the reverse break-up fee or the merger consideration. Any payments in excess of the $1.15 per share will be incremental to the total purchase price of $33.50 or the reverse break-up fee. This increases the total transaction consideration to up to $34.15 per share in the event the transaction is consummated and total downside protection to $4.30 per share, or approximately $470 million in the aggregate, in the event the transaction is terminated.

The facts demonstrate that our offer to acquire Spirit remains decisively superior to the recently amended Frontier transaction. Yet, the entrenched Spirit Board is clinging to the inferior Frontier transaction with pie-in-the-sky promises and an overly simplistic regulatory argument. Their pitch to shareholders simply doesn’t add up.

JetBlue offers more value and certainty to Spirit shareholders, while the Spirit Board continues to mislead its own shareholders:

• Superior all-cash price of at least $33.50per Spirit share representing a substantial premium of 52.1% above the implied value of the amended Frontier transaction and guaranteeing certain value.

• Offers Spirit shareholders more value under any scenario and better trading value in the short term. As we predicted in our release on Friday night, the dilution from incremental leverage embedded in the Frontier amended merger agreement put pressure on the Spirit stock. On the other hand, the rejection of the Frontier transaction will result in a higher price for Spirit stock, even before any consideration of the likelihood of JetBlue’s transaction closing.

Spirit’s Board has made a lot of lofty promises to secure “yes” votes from investors, but here’s what the Spirit Board and Frontier management do NOT tell you:

• Shareholders should not be fooled by Spirit’s and Frontier’s rosy projections of $50 per share. Spirit shareholders are being promised an unrealistic future value based on financial projections that are a house of cards given the realities of the market. Among other things, they want you to believe in assumptions that fail to account for the actual market conditions they would face, including the need for pilot pay increases and elevated fuel costs. In a recent message, the Spirit’s pilot union, ALPA, said it was “deeply troubled” that Spirit had not planned a single dollar for increased pilot wages for the next five years, even as Spirit’s pilot attrition has skyrocketed.
  
  When using realistic adjustments and accounting for time value of money, the present value of Spirit’s future share price is between $20-30; a clear discount to the $33.50 in cash offered by JetBlue.

• Since our updated proposal on June 6 through June 24, the Spirit stock price increased by 18%; on June 27, the first day of trading since the announcement of the amended Frontier merger agreement, the Spirit stock declined by 8%.

• Spirit shareholders are effectively paying for half of the recent improvement in the terms of the Frontier transaction. While the Spirit Board presents Frontier’s revised transaction as a $2 per share improvement in headline price, in reality, it is only about $1 of incremental economic value. Spirit shareholders will own approximately 50% of the combined company and, as a result, are effectively funding half of this improvement in cash consideration as it is being financed through debt taken on by the combined company. As a result, the implied market value of the Frontier transaction is now ($22.03) LOWER than it was on Friday ($22.29), before their supposed improvement. Frontier is taking this value out of your pocket to fund part of their payment to you.

• Frontier and Spirit would have you believe their transaction will sail through antitrust approval, but that confidence is either naive or disingenuous. Outside experts agree that, within the current administration, our transaction has a similar chance as Frontier in gaining approval. Frontier and Spirit themselves have even acknowledged the significant antitrust risk inherent in their combination – both by adding a reverse break-up fee and walking back their optimistic timeline.

It is clear the market agrees – the JetBlue offer is good for Spirit shareholders. Since our initial proposal was made public on April 5, Spirit’s share price performance has reflected its shareholders’ overwhelmingly positive view of our offer, and their confidence in our ability to achieve regulatory clearance of the transaction.

The entrenched Spirit Board is now claiming they have served their shareholders by approving an amended Frontier transaction. Yet in fact, they have never negotiated with us and have now favored a transaction that better serves Frontier’s controlling shareholder than Spirit’s shareholders. In exchange for the minimal financial concessions the Spirit Board was able to get from Frontier – which, after even cursory examination, don’t add value or support their projected future value – they chose to weaken Spirit shareholders’ governance in the combined company through less board representation.

Spirit’s entrenched Board continues to stand in the way of the most value creating opportunity available to Spirit shareholders. Time is running out for Spirit shareholders to maximize their investment. The facts are clear. Our proposal is superior. Vote AGAINST the Frontier transaction at Spirit’s special meeting on June 30.

Sincerely,

Robin Hayes
Chief Executive Officer