Frontier Further Sweetens Offer for Spirit Airlines Merger

Frontier Airlines has, once again, sweetened the terms of its offer to combine with fellow low-cost carrier, Spirit Airlines, less than a week before Spirit’s shareholders are scheduled to vote on the merger.

Frontier’s new and improved offer is for $4.13 per share, which is $2 more per share than it originally bid—a heightened overture that arrives after its rival JetBlue Airways repeatedly upped its own all-cash offer to purchase Spirit outright.

In recent weeks, the aviation industry has seen the one-upmanship between Frontier and JetBlue continue to escalate, as each improved its bid and/or added provisions to their proposals to appeal to stockholders.

Either deal, if accepted, stands to trigger the formation of the fifth-largest airline in the U.S. Spirit’s shareholders are slated to submit their votes on Frontier’s proposal on Thursday, June 30.

JetBlue has opined that its deal would better allow the combined airlines to compete with larger carriers and grow quickly, even though pilots and aircraft are currently in short supply.

In its reaction to Frontier’s freshly revised offer, JetBlue today wrote: “We continue to believe JetBlue’s proposal is decisively superior to the Frontier transaction, even considering its revised terms, and it continues to offer Spirit shareholders significantly more value, more cash, more certainty, and more regulatory protections.”

It went on: “We will more thoroughly review and assess the revised terms of the Frontier-Spirit merger agreement, and we intend to continue our ‘vote no’ campaign against the inferior Frontier transaction at the special meeting.”

Hoping to provide further peace of mind for Spirit stockholders, Frontier’s new offer also increases the previously proposed $250 million termination fee to $350 million—matching JetBlue’s similar proviso—in case the deal ultimately fails to receive regulatory approval.

Spirit CEO Ted Christie told CNBC that the board has reviewed JetBlue’s latest offer, but remains concerned that such a deal would likely be blocked by regulators, as its recent partnership with American Airlines (AA) is already under government scrutiny. He said Spirit’s board continues to view a fusion with Frontier as “a superior transaction”.

JetBlue’s Northeast Alliance with AA enables the two carriers to effectively combine their networks in the region, coordinating flights and passenger bookings using each other’s aircraft.

Saying that the cooperation between the two carriers eliminates competition and drives up airfare prices, the Department of Justice filed an antitrust lawsuit to block the agreement in September of last year.