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ISS Says JetBlue's Spirit Offer 'More Favorable' But Sticks To Frontier

By Dave Simpson

Institutional Shareholder Services (ISS) said that JetBlue Airways Corp's JBLU.O latest offer to buy Spirit Airlines Inc SAVE.N is "more favorable" for the ultra-low-cost airline's shareholders, but maintained its support for the Frontier deal.

Spirit Airlines on Tuesday 28 June again cited antitrust concerns to reject JetBlue's sweetened offer and asked its shareholders to vote for a merger with Frontier at Thursday 30 June's meeting.

The influential proxy advisory firm in a report dated Monday 27 June said, with the shareholder meet to approve the deal set as early as Thursday 30 June, it was hesitant to change its earlier stand recommending them to vote for Frontier's offer.

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"The addition of the ticking fee in the JetBlue offer - a provision without a counterpart in the Frontier offer - provides a further level of regulatory risk mitigation," ISS said.

JetBlue's ticking fee would give Spirit shareholders a monthly prepayment of 10 cents per share between January 2023 and the closing of the deal.

ISS in a report published on Friday 24 June had urged shareholders of Spirit Airlines to vote for a proposed merger with Frontier Group, after it boosted its offer for the airline.

Both JetBlue and Bill Franke-backed Frontier are locked in an intense bidding war for Spirit as they seek to create the fifth-largest airline in the United States that can take on the legacy players.

Spirit Airlines Again Rebuffs JetBlue For Merger With Frontier

The above news followed news that Spirit Airlines Inc SAVE.N on Tuesday 28 June again cited antitrust concerns to reject JetBlue Airways Corp's JBLU.O sweetened offer and asked its shareholders to vote for a merger with Frontier Group Holdings Inc ULCC.O at a meeting on Thursday 30 June.

In the latest offer, JetBlue included a ticking fee of 10 cents per Spirit share, raising the deal value to $34.15 per share, representing a 51% premium to Spirit's Monday 27 June closing price.

It also raised the breakup fee by $50 million to $400 million if the deal fails to get regulatory approval in an attempt to persuade Spirit to reject Frontier's bid.

Spirit, however, has been skeptical of the deal clearing the antitrust hurdle due to JetBlue's alliance with American Airlines Group Inc AAL.O in the Northeast, which has been sued by the Justice Department.

"The latest offer from JetBlue does nothing to address our Board's serious concerns that a combination with them would not receive regulatory approval," Spirit chief executive Ted Christie said.

JetBlue did not respond to a request for comment. The New York-based carrier had offered to make some divestitures to seal a deal with Spirit, but excluded the 'Northeast Alliance' from those pledges.

Both JetBlue and Bill Franke-backed Frontier are locked in an intense bidding war for Spirit as they seek to create the fifth-largest airline that can take on the legacy players in the United States.

Frontier's latest cash-and-stock offer was valued at $22.03 per share as of Monday 27 June's closing price, well below JetBlue's bid.

After Frontier raised the cash component of the offer last week, influential proxy advisory firm Institutional Shareholder Services has backed a deal with the airline.

JetBlue, however, has found support from one Spirit shareholder, TIG Advisors LLC. The asset manager, which owns approximately 2% stake, said it would vote against Spirit's merger with Frontier as the JetBlue offer was better.

Shares of Spirit Airlines were up 1.6% and Frontier 3%, while JetBlue shares were up approximately 1% amid a broader surge in travel stocks.

TIMELINE-Battle For Spirit Airlines Enters Final Stretch

All of the above news followed news that Spirit Airlines Inc <SAVE.N> on Tuesday 28 June rejected JetBlue Airways Corp's <JBLU.O> latest sweetened offer and recommended that shareholders vote in favor of a merger with Frontier Group Holdings Inc <ULCC.O> at a meeting on Thursday 30 June.

Below are the key events of the takeover saga:

Date Development
Feb. 7 Frontier makes a cash-and-stock offer of $25.83/share for Spirit Airlines
Feb. 8 Lawyers from the US Justice Department say Spirit and Frontier's merger to create the fifth-largest airline in the country would face close scrutiny
March 10 Several public advocacy groups call on US regulators to block Frontier's bid for Spirit
April 5 JetBlue makes an unsolicited $3.6 billion, or $33/share, all-cash bid for Spirit
April 6 JetBlue mounts a vigorous defense of its unsolicited $3.6 billion bid for Spirit, adding that it is "highly confident" of securing regulatory approval
April 7 Spirit says that it would enter into discussions with JetBlue on its $3.6-billion offer as it could likely lead to a "superior proposal" to the one from Frontier
May 2 Spirit rejects JetBlue's $33/share offer, saying it had a low likelihood of winning regulatory approval
May 10 Head of Sun Country Airlines <SNCY.O> throws his backing behind potential merger in the ultra-low-cost airline sector
May 11 Spirit says it will hold a shareholder meeting on June 10 for a vote on its proposed merger with Frontier
May 16 JetBlue makes hostile all-cash takeover offer of $30/share and adds it was ready to "negotiate in good faith a consensual transaction at $33"
May 19 Spirit Airlines urges shareholders to reject the hostile offer from JetBlue, saying it was "a cynical attempt to disrupt" its merger with Frontier
May 31 Proxy advisory firm ISS urges Spirit shareholders to vote against a proposed merger with Frontier
June 2 Frontier agrees to pay a break-up fee of $250 million in a bid to salvage its $2.9 billion acquisition of Spirit Airlines
June 3 Shareholder advisory firm Glass Lewis recommends Spirit Airlines investors approve Frontier Group's $2.9 billion takeover bid, saying it was the "best available" at this time.
June 6 JetBlue sweetens its takeover bid for Spirit by offering $31.50 per share in cash, comprising $30 per share at deal close and the prepayment of $1.50 per share of the reverse break-up fee.
June 8 Spirit Airlines delays to June 30 a shareholder meeting to vote on its proposed merger with Frontier.
June 14 Spirit Airlines said it was in talks with JetBlue Airways and has granted JetBlue access to the due diligence information being shared with Frontier Group. Spirit said it was expecting to decide on the proposal by the end of this month.
June 20 JetBlue Airways said it had sweetened its takeover offer for Spirit Airlines to $33.50 per share.
June 24 Frontier bumps up the cash component of the deal by $2 per share to $4.13 per share, prompting Spirit Airlines to urge its shareholders back a deal with its ultra-low-cost rival at a meeting next week.
June 25 ISS urges Spirit shareholders to vote for a proposed merger with Frontier after the carrier sweetened its offer.
June 27 Frontier's Chief Executive Barry Biffle says the revised offer for Spirit will be enough to secure a merger deal with the ultra-low-cost carrier.
June 27 JetBlue ratcheted up its bidding war. Offers a "ticking fee", which would give Spirit shareholders a monthly prepayment of 10 cents per share between January 2023 and the closing of the deal, raising the overall deal value to $34.15 per share.
June 28 ISS says JetBlue's latest offer is "more favorable" but maintains its support for the Frontier deal.
June 28 Spirit rejects JetBlue's sweetened takeover offer and recommends that shareholders vote in favor of a merger with Frontier at a meeting on Thursday.

ISS Says New JetBlue Offer More Favorable For Spirit Airlines

All of the above news followed news that Institutional Shareholder Services (ISS) said JetBlue Airways Corp's JBLU.O latest offer to buy Spirit Airlines Inc SAVE.N is "more favorable" for the ultra-low-cost airline's shareholders, but maintained its support for the Frontier deal.

The influential proxy advisory firm in a report dated Monday said, with the shareholder meet to approve the deal set as early as Thursday 30 June, it was hesitant to change its earlier stand recommending them to vote for Frontier's offer.

Frontier's cash-and-stock offer was valued at $22.03 per share as of Monday 27 June's close, while JetBlue's offer, including a "ticking fee", was valued at $34.15 per share, a premium of 51% premium to Spirit's last close.

"The addition of the ticking fee in the JetBlue offer - a provision without a counterpart in the Frontier offer – provides a further level of regulatory risk mitigation," ISS said.

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

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Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
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