Yesterday, U.S. low-cost carriers Spirit Airlines and Frontier Airlines announced an amendment to the merger agreement they had unveiled on February 5th. The change has already been unanimously approved by the boards of directors of both companies.
As reported, the new agreement establishes that Frontier would pay Spirit a reverse termination fee of 250 million dollars, or 2.23 dollars per share, if the merger is not consummated due to antitrust reasons.
This instrument, contemplated by the U.S. laws, ensures the payment of a sum by the purchaser in the event of a breach of the acquisition agreement, lack of financing or other impediments.
William A. Franke, Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners, the company’s majority shareholder, said: «We continue to believe in the strategic rationale of a combined Spirit and Frontier, which brings together two complementary businesses to create America’s most competitive ultra-low fare airline».
Moreover, the executive assured that the higher reverse termination fee is based on the «conviction that regulators will find this combination to be pro-competitive».
For his part, Ted Christie, Spirit’s President and CEO, said: «Since announcing our transaction with Frontier, we have had extensive constructive conversations with our stockholders, who have expressed support for the strategic rationale of our combination but a desire for additional stockholder protections».
Frontier’s President and CEO Barry Biffle assured that they remain «excited about the combination with Spirit, which will create a true nationwide ultra-low fare airline» to compete against the «Big Four» (American, Delta, United and Southwest). He also emphasized that they will continue to «work closely» in order to «successfully complete the transaction».
