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Frontier Raises Offer For Spirit To Stave Off JetBlue's Bid

By Dave Simpson

Spirit Airlines Inc SAVE.N on Friday 24 June urged its shareholders to back a merger deal with Frontier Group Holdings ULCC.O at a meeting this week after Frontier boosted its offer for the ultra low cost carrier.

Details

Spirit is the subject of a bidding war between Frontier and JetBlue Airways Corp JBLU.O.

Both bidders view Spirit as an opportunity to expand their domestic footprints at a time when the U.S. airline industry is dogged by labor and aircraft shortages. Either of the deals would create the fifth-largest U.S. airline.

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Under the revised terms, Frontier will bump up the cash component of the deal by $2 per share to $4.13 per share, along with 1.9126 Frontier shares in the cash-and-stock deal. Frontier will prepay $2.22 per share as a cash dividend to Spirit stockholders following approval of the transaction.

Denver-based Frontier has also increased its reverse termination fee to Spirit by $100 million to $350 million.

Spirit shareholders are due to vote on the merger deal with Frontier on June 30.

Florida-based Spirit has repeatedly rejected JetBlue's offer, saying it has a low likelihood of winning approval from U.S. regulators.

Yet, JetBlue has not given up on its quest, and has been trying to persuade Spirit shareholders to vote against the deal with Frontier.

On Monday, New York-based JetBlue sweetened its offer for Spirit by $2 to $33.50 per share in cash. Frontier's offer, at its closing price on Friday, is worth $24.29 in stock and cash.

"A JetBlue transaction faces significantly greater regulatory impediments than a Frontier transaction," Spirit said.

In a statement late on Friday, JetBlue said it continued to believe its proposal was superior to Frontier's, but said it will "more thoroughly" review and assess the revised terms of Frontier's proposal.

Both the deals are expected to face intense regulatory scrutiny. But JetBlue's Northeast Alliance partnership with American Airlines AAL.O is a sticking point with Spirit.

The Justice Department has sued JetBlue and American to unwind the partnership. Spirit has asked JetBlue to drop the partnership if it wants a deal, but JetBlue declined.

Frontier stock closed up 6.6% on Friday 24 June at $10.54, while Spirit finished up 2.9% to $24.52. JetBlue shares gained 5.8% to close at $8.62.

ISS Urges Spirit Shareholders To Vote For Frontier Offer

The above news was followed by news that proxy advisory firm Institutional Shareholder Services Inc (ISS) has urged shareholders of Spirit Airlines Inc SAVE.N to vote for a proposed merger with Frontier Group Holdings Inc ULCC.O.

"On balance, support for the merger with Frontier on the revised terms is warranted," the proxy advisory firm said in a report published late Friday 24 June and made public on Saturday 25 June.

Spirit is the subject of a bidding war between Frontier and JetBlue Airways Corp JBLU.O.

The proxy advisory firm last month asked Spirit shareholders to reject Frontier's offer, saying JetBlue's competing offer of $30 a share is superior from a financial standpoint.

Earlier this month, New York-based JetBlue sweetened its offer for Spirit by $2 to $33.50 per share in cash.

Spirit Airlines on Friday 24 June said that Frontier raised its cash offer by $2 per share to buy the airline and urged its shareholders to back a merger deal with Frontier at a meeting this week.

Spirit shareholders are due to vote on the merger deal with Frontier on 30 June.

ISS also said that the current offer from Frontier appears preferable as it matches the $2.00 increase in JetBlue's offer price and also provides a higher prepayment of $2.22 per share compared to $1.50 per share from JetBlue.

Denver-based Frontier also increased its reverse termination fee to Spirit by $100 million to $350 million.

Florida-based Spirit has repeatedly rejected JetBlue's offer, saying it has a low likelihood of winning approval from US regulators.

However, JetBlue has been persistent and said that it continued to believe its proposal was superior to Frontier's adding that it will "more thoroughly" review and assess the revised terms of Frontier's proposal.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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