Spirit backs Frontier merger after raising bid

© Reuters. FILE PHOTO: The logo of low-cost carrier Spirit Airlines is pictured on an Airbus plane in Colomiers, near Toulouse, France, on November 6, 2018. REUTERS/Regis Duvignau // File photo

David Shepherdson

(Reuters) – Spirit Airlines Inc said on Friday it backed a merger deal with Frontier Group Holdings after Frontier raised its cash bid by $2 a share to buy a rival ultra-low-cost airline, according to regulatory filings https://www.sec.gov/Archives/edgar/data/0001498710/000149871022000264/save-20220624.htm.

On Monday, JetBlue Airways (NASDAQ: JetBlue) raised its takeover bid for Spirit to $33.50 a share, an increase of $2, as it tried to persuade Spirit’s board to approve its deal. Frontier’s offer was valued at $24.29 in stock and cash at Friday’s closing price.

Spirit’s board said Friday that based on Frontier’s improved offer, it “reiterated its unanimous recommendation that Spirit shareholders vote” in favor of the merger.

In a statement late Friday, JetBlue said it still believed its proposal was superior to Frontier’s, but said it would “more thoroughly” review and evaluate Frontier’s proposed revisions.

Spirit shareholders will vote on Frontier’s proposed takeover on Wednesday.

Frontier shares closed up 6.6% at $10.54 on Friday, while Spirit closed up 2.9% at $24.52. JetBlue shares rose 5.8 percent to close at $8.62.

The two airlines have been wrestling to create the fifth-largest U.S. airline, helping buyers compete with larger traditional carriers as the industry faces a shortage of labor and planes.

Under the terms of the offer, Frontier will pay $4.13 in cash, an increase of $2, or 1.9126 Frontier shares per Spirit share. Frontier has agreed to advance $2.22 per share as a cash dividend to Spirit shareholders upon approval of the transaction.

Frontier will also increase a reverse termination fee to Spirit to $350 million if the deal does not close for antitrust reasons.

Spirit’s board had previously rejected JetBlue’s proposal, arguing that U.S. antitrust regulators would not approve a partnership with JetBlue, noting JetBlue’s refusal to abandon its alliance with American Airlines (NASDAQ: ).

Any deal will face strict regulatory scrutiny.

The Justice Department filed an antitrust lawsuit against American Airlines and JetBlue Airways in September, seeking to end the alliance, saying it would lead to higher fares at the busy northeastern U.S. airport.

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