Bidding war escalates as Spirit again delays decision on Frontier merger
For the second time this month, Broward County’s Spirit Airlines has postponed a final decision on whether to merge with Frontier Airlines.
On Wednesday night, less than 24 hours before Spirit’s shareholders were supposed to vote on the proposed combination with the Denver-based discount carrier, Spirit said it postponed the meeting until July 8.
Spirit said it was delaying the shareholders’ tally so the airline’s board of directors can continue discussions with Frontier and New York-based JetBlue Airways. The vote originally was set for June 10, but Spirit delayed it until June 30.
Frontier and JetBlue are engaged in a fierce bidding war for Miramar-based Spirit, which is known for its rock-bottom fares and no-frills amenities. The airline employs 3,400 people in South Florida and commands the top spot for its share of the passenger market at Fort LauderdaleHollywood International Airport. At Miami International Airport, Spirit is the distant No. 2 carrier behind American Airlines.
The tug of war between the airlines started after Spirit and Frontier announced in February they would merge to create a national discount airline. Frontier made a cash-andstock offer that was valued then at around $2.9 billion and would give Frontier controlling ownership. Combining the two airlines would create the fifth-largest U.S. airline, trailing the legacy carriers American Airlines, Southwest, Delta and United.
JetBlue launched a hostile cash takeover bid in April and has boosted it to $3.64 billion or $33.50 for each share of Spirit’s stock, a significant premium over Frontier’s offer — which, based on stock prices, has fluctuated between roughly $2.4 billion and $2.9 billion.
Spirit CEO Ted Christie has criticized JetBlue’s motivation — on Wednesday night in a live interview on Yahoo Finance he said the rhetoric from JetBlue’s CEO “appears childish” — and urged Spirit’s shareholders to vote for the Frontier merger.
JetBlue CEO Robin
Hayes called his airline’s offer for Spirit “clearly” superior to Frontier’s bid.
Christie and Spirit’s board, as well as airlineindustry analysts, have said federal regulators likely would reject JetBlue’s acquisition of Spirit due to anti-competitive concerns and fears that such a deal would lead to higher airfares.
Realizing those concerns, JetBlue is offering Spirit a $400 million breakup fee — a boost from $350 million — should Spirit accept its bid but regulators block it. On Tuesday, JetBlue improved its offer by saying it would pay Spirit’s shareholders $2.50 a share in an advance payment — up from $1.50 a share — starting in 2023 and until a deal would be completed or terminated.
On Friday, Frontier had sweetened its offer. Frontier boosted the cash portion of its bid by $2 to $4.13 per share of Spirit stock. In addition to the cash bump, the share-consideration portion remains that Spirit shareholders would receive 1.9126 of Frontier shares for each of their Spirit shares. And Frontier increased the amount it would pay Spirit in a breakup fee to $350 million, up from $250 million, if federal regulators won’t approve a SpiritFrontier merger.
Spirit said on Friday its board continues to unanimously recommend that shareholders vote to go through with the Frontier merger. However, it’s clear JetBlue remains a contender since Spirit said in its Wednesday statement that the company’s board was continuing to have conversations with JetBlue and Frontier.
Institutional Shareholder Services, the influential corporate-governance company, has said it supports a merger of Spirit and Frontier.