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Spirit Airlines (SAVE)-Frontier Add Break-Up Fee to Merger Deal
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Spirit Airlines (SAVE - Free Report) and Frontier Group Holdings (ULCC - Free Report) announced an amended merger agreement by dint of which the latter will pay a reverse termination fee of $250 million to the former in case their deal fails to get regulatory approval for antitrust concerns.
The move comes soon after proxy advisory firm, Institutional Shareholder Services Inc., urged Spirit Airlines shareholders to vote against the deal with Frontier, prompting SAVE to negotiate a break-up fee with ULCC.
Spirit Airlines and Frontier entered into a $2.9-billion merger agreement in February, aiming to enhance competition and create the fifth-largest U.S. airline, offering ultra-low fares. Per the terms of the merger agreement, Spirit Airlines’ shareholders will receive $25.83 per share, a premium of about 19% on the closing price of Feb 4. SAVE will own approximately 48.5% of the combined airline, while the remaining will be owned by ULCC. Both Spirit Airlines and Frontier carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In April, JetBlue Airways (JBLU - Free Report) , carrying a Zacks Rank #4 (Sell), submitted a proposal to acquire Spirit Airlines in a $3.6-billion deal. JBLU regarded the proposal as “superior” to the Spirit Airlines-Frontier Airlines deal since it provided an attractive opportunity for SAVE’s shareholders. JetBlue’s $3.6-billion deal, equivalent to $33 per share in cash, represented a premium of 52% to Spirit Airlines’ undisturbed share price on Feb 4, 2022, and a premium of 50% to its closing share price on Apr 4, 2022.
The enhanced offer was, however, turned down by Spirit Airlines in early May, citing regulatory risks. This did not deter JBLU from pursuing its interest in SAVE and it launched a hostile all-cash unsolicited tender offer to acquire all the outstanding shares of the latter's common stock. In a letter addressed directly to Spirit Airlines’ shareholders, JetBlue, on May 16, tweaked its purchase price to $30 per share (without interest and less any required withholding taxes). Spirit Airlines turned down the offer yet again, citing regulatory concerns. The offer included a $200-million reverse breakup fee in the event of failure of the acquisition to materialize.
Regarding the latest development on the Spirit Airlines-Frontier deal, JetBlue said, “The addition of a reverse termination fee in the face of a likely defeat is simply an acknowledgement that the regulatory profiles and timelines of both deals are indeed similar.”
Spirit Airlines’ chairman of the board, Mac Gardner, said, "The combination of a higher reverse termination fee and a much greater likelihood to close in a Frontier merger provides substantially more regulatory protection for Spirit stockholders than the transaction proposed by JetBlue."
Spirit Airlines’ shareholders’ meeting is scheduled for Jun 10.
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Spirit Airlines (SAVE)-Frontier Add Break-Up Fee to Merger Deal
Spirit Airlines (SAVE - Free Report) and Frontier Group Holdings (ULCC - Free Report) announced an amended merger agreement by dint of which the latter will pay a reverse termination fee of $250 million to the former in case their deal fails to get regulatory approval for antitrust concerns.
The move comes soon after proxy advisory firm, Institutional Shareholder Services Inc., urged Spirit Airlines shareholders to vote against the deal with Frontier, prompting SAVE to negotiate a break-up fee with ULCC.
Spirit Airlines and Frontier entered into a $2.9-billion merger agreement in February, aiming to enhance competition and create the fifth-largest U.S. airline, offering ultra-low fares. Per the terms of the merger agreement, Spirit Airlines’ shareholders will receive $25.83 per share, a premium of about 19% on the closing price of Feb 4. SAVE will own approximately 48.5% of the combined airline, while the remaining will be owned by ULCC. Both Spirit Airlines and Frontier carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Spirit Airlines, Inc. Price
Spirit Airlines, Inc. price | Spirit Airlines, Inc. Quote
In April, JetBlue Airways (JBLU - Free Report) , carrying a Zacks Rank #4 (Sell), submitted a proposal to acquire Spirit Airlines in a $3.6-billion deal. JBLU regarded the proposal as “superior” to the Spirit Airlines-Frontier Airlines deal since it provided an attractive opportunity for SAVE’s shareholders. JetBlue’s $3.6-billion deal, equivalent to $33 per share in cash, represented a premium of 52% to Spirit Airlines’ undisturbed share price on Feb 4, 2022, and a premium of 50% to its closing share price on Apr 4, 2022.
The enhanced offer was, however, turned down by Spirit Airlines in early May, citing regulatory risks. This did not deter JBLU from pursuing its interest in SAVE and it launched a hostile all-cash unsolicited tender offer to acquire all the outstanding shares of the latter's common stock. In a letter addressed directly to Spirit Airlines’ shareholders, JetBlue, on May 16, tweaked its purchase price to $30 per share (without interest and less any required withholding taxes). Spirit Airlines turned down the offer yet again, citing regulatory concerns. The offer included a $200-million reverse breakup fee in the event of failure of the acquisition to materialize.
Regarding the latest development on the Spirit Airlines-Frontier deal, JetBlue said, “The addition of a reverse termination fee in the face of a likely defeat is simply an acknowledgement that the regulatory profiles and timelines of both deals are indeed similar.”
Spirit Airlines’ chairman of the board, Mac Gardner, said, "The combination of a higher reverse termination fee and a much greater likelihood to close in a Frontier merger provides substantially more regulatory protection for Spirit stockholders than the transaction proposed by JetBlue."
Spirit Airlines’ shareholders’ meeting is scheduled for Jun 10.