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Spirit Airlines (SAVE) Sticks to Frontier, Rejects JetBlue Offer

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Spirit Airlines (SAVE - Free Report) sticks to its merger agreement with Frontier Group Holdings (ULCC - Free Report) , shunning JetBlue Airways’ (JBLU - Free Report) recently enhanced takeover proposal.

Spirit Airlines contends that the JetBlue offer does not address “serious regulatory concerns” or even “deliver greater value”. The company has rejected JetBlue’s enhanced acquisition proposals multiple times, citing regulatory concerns. It feels that the regulatory risks of a merger with JetBlue (primarily because of its Northeast Alliance) are significantly greater than those with Frontier.

SAVE also believes that JBLU’s offer is substantially below the $50 per share or more value that could result from a merger with ULCC. Ted Christie, president and CEO of Spirit Airlines, said, "While we have engaged with JetBlue for weeks and provided them a level playing field on which they could make their best offer, unfortunately they have now turned to scurrilous rhetoric instead of a substantive improvement in their offer.”

In the recently enhanced takeover offer, JetBlue added a ticking fee that would provide Spirit Airlines’ shareholders with a monthly prepayment of 10 cents per share between January 2023 and the closing or termination of the deal. SAVE’s management said the ticking fee has no economic effect for 18 months after signing the deal.

JetBlue also increased its reverse break-up fee to $400 million from the previously proposed $350 million as part of the enhanced proposal. It further increased the prepayment (payable to Spirit Airlines’ shareholders soon after they vote in favor of the deal) to $2.50 per share from $1.50 per share, as agreed upon previously.

Per Frontier’s takeover offer, which too was boosted recently, Spirit Airlines’ shareholders will receive $4.13 per share in cash. ULCC will also prepay $2.22 per share to SAVE’s shareholders as cash dividend upon approval of the transaction.

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

Each of the 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.

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