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Spirit Airlines (SAVE) Backs Frontier Deal on Enhanced Offer

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Spirit Airlines (SAVE - Free Report) has announced an amended merger agreement with Frontier Group Holdings, Inc (ULCC - Free Report) , which includes increased per-share cash consideration and higher reverse termination fees. SAVE arrived at this decision after thoroughly reviewing JetBlue Airways’ (JBLU - Free Report) recently enhanced proposal to acquire the former. Following this news, Spirit Airlines’ shares gained 2.9% at the close of business on Jun 24, while Frontier shares and JetBlue rose 6.6% and 5.8%, respectively.

As part of the improved proposal, Frontier has increased its per-share cash consideration payable to Spirit Airlines’ shareholders by $2 to $4.13. This is in addition to 1.9126 Frontier shares that the company had agreed to pay previously. ULCC will also prepay $2.22 per share to SAVE’s shareholders as cash dividend upon approval of the transaction.

Frontier has also increased its reverse termination fee by $100 million to $350 million, payable to Spirit Airlines in case the deal fails to materialize due to antitrust concerns.


Comparing JetBlue’s proposal with Frontier, Mac Gardner, chairman of the board of Spirit Airlines, said, "A merger with Frontier poses less regulatory risk on Spirit stockholders and increases competition in the industry for the benefit of consumers. The Board is confident a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders, with more certainty and the strongest likelihood of closing."

Last week, JetBlue revised terms of the acquisition proposal at Spirit Airlines’ request, offering $33.50 per share to SAVE’s shareholders, up from the previous proposal of $31.50.

JetBlue began to pursue its interest in acquiring Spirit Airlines in April by proposing a $3.6-billion deal to take over the latter. SAVE’s amended merger agreement with Frontier marks the third time that the company has turned down JBLU’s takeover offers.

Each of the three stocks mentioned above carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.