Spirit Airlines has recommended shareholders approve Frontier Airlines’ increased acquisition offer after Frontier sweetened the deal by $2 per share, and raised its reverse termination fee to $350 million.
Frontier’s cash-plus-stock offer, first announced in February, originally called for granting Spirit stockholders nearly two shares of Frontier stock, plus $2.13 per share. The Denver-headquartered airline has now upped that to $4.13 per share, according to a securities and exchange commission (SEC) filing on 24 June. That equates to a purchase price of about $2.6 billion.
It’s the latest move in the spiralling tug-of-war for the Miramar-based airline. Last week JetBlue Airways, which had made an unsolicited bid for the carrier in April, increased its all-cash offer for the airline to $33.50 per share, to about $3.64 billion total.
“We are thrilled to announce the terms of Spirit’s amended agreement with Frontier, which includes nearly double the per-share cash consideration of our prior agreement with Frontier while still allowing stockholders to benefit from the economic upside of airline industry recovery,” says Spirit chief executive Ted Christie on 24 June. “As this recovery progresses and demand returns, the price of the combined airline’s stock is expected to exceed the per-share price of JetBlue’s fixed, all-cash offer.”
Since JetBlue’s unsolicited bid, Spirit’s board repeatedly indicated that it favours a tie-up with Frontier rather than JetBlue on the grounds that US antitrust regulators are less likely to approve a JetBlue-Spirit combination. It maintains that stance.
“The board believes a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders and has a greater likelihood of closing,” Spirit adds.
Spirit says it conducted “a thorough process when considering competing proposals” and that the two suitors had access to the same due-diligence information, on the same terms.
“Spirit’s process included extensive discussions with Frontier and JetBlue regarding financial terms, regulatory risks and integration processes,” the airline says. “Following the conclusion of this process, the Spirit board determined that the revised offer Spirit received from JetBlue on June 20, 2022 is not a superior proposal and continues to recommend Spirit stockholders adopt the merger agreement with Frontier.”
The new terms of the deal include Frontier’s higher per-share cash consideration, at $4.13 in cash, “in addition to the per-share stock consideration of 1.9126 shares of Frontier that Frontier previously agreed to pay Spirit stockholders”.
In addition, $2.22 per share will be pre-paid to Spirit stockholders as a cash dividend following Spirit’s shareholders’ approval of the transaction.
Under the amended deal, Frontier also increased its reverse termination fee by $100 million to $350 million should the transaction fail due to antitrust issues.
Spirit has scheduled a special shareholder meeting to approve the proposed merger with Frontier for 30 June. That meeting was delayed from earlier this month because Spirit had said it needed more time to assess the JetBlue offer.
Late on 24 June, JetBlue publicly responds, saying its offer remains “decisively superior” to the revised Frontier bid.
”The conflicted Spirit board continues to rely on a series of mischaracterizations to justify an inferior deal,” JetBlue says, adding that it will continue its campaign to encourage shareholders to vote no to the Frontier deal.
Updates on 24 June to add JetBlue reaction to new Frontier bid.
