General Industry

ISS Urges Spirit Shareholders To Reject Frontier Offer

By Dave Simpson
ISS Urges Spirit Shareholders To Reject Frontier Offer

Proxy advisory firm Institutional Shareholder Services Inc (ISS) has urged shareholders of Spirit Airlines SAVE.N to vote against a proposed merger with Frontier Group Holdings ULCC.O.


JetBlue Airways Inc's JBLU.O competing offer of $30 a share is superior from a financial standpoint, ISS said in a report on Tuesday 31 May, with a cash consideration at a meaningfully higher premium than the mostly stock deal from Frontier.

The value of Frontier's cash-and-stock offer for each share of the discount carrier stood at $22.31 on Tuesday 31 May.

"The (Spirit) board's view that a Frontier merger has a safer path to regulatory approval is not supported by any guarantee of value for shareholders in the event of regulatory rejection," the proxy advisory firm said in a report.

Florida-based Spirit's chief executive, Ted Christie, said last week that it was unlikely shareholders would vote against its proposed merger with Frontier.


The advisory firm also said the board's decision to forgo an auction process is a cause for concern and shareholders may question the board's failure to negotiate a reverse termination fee with Frontier in light of the potential regulatory risk and JetBlue's offer of a $200 million termination fee.

In response, Spirit disagreed and added the "ISS appears overfocused on the absence of a reverse termination fee in that deal".

Meanwhile, JetBlue said the "report highlights the flawed process that the conflicted Spirit Board followed, which only underscores the need for Spirit's Board to now come to the table and negotiate."

TIMELINE-Spirit Airlines, JetBlue Lock Horns Over Takeover

The above news was followed by news that the battle to snap up Spirit Airlines <SAVE.N> is heating up. In the latest twist, proxy advisory firm Institutional Shareholder Services (ISS) urged shareholders of the airlines to vote against a proposed merger with Frontier Group Holdings <ULCC.O>.

JetBlue Airways' <JBLU.O> competing offer of $30 a share is superior from a financial standpoint, ISS said in a report on May 31.


JetBlue, which is locked in a takeover battle for Spirit with Frontier Group, has argued that a deal would help the companies better compete with the "Big Four" US airlines that control nearly 80% of the passenger market in the country.

Below are the key events in 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 U.S. 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 U.S. 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 has urged shareholders of Spirit to vote against a proposed merger with Frontier

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