Late last week, Spirit Airlines announced modifications to the merger agreement offered by Frontier Airlines. The move includes an increase in the cash consideration per share and a 350 million dollars reverse termination fee. Earlier in June, both companies had reported changing an amendment to the initial agreement.
This time, and after «a thorough process focused on value and safety» Spirit’s Board of Directors reiterated its recommendation to the company’s shareholders to adopt the merger agreement with Frontier. Next shareholder meeting is scheduled for Thursday, June 30th.
The amended agreement, approved by the managements of the two companies, provides for Frontier to increase the cash consideration per share payable to 4.13 dollars in cash. Additionally, 2.22 dollars per share will be paid upfront to Spirit shareholders on a record date to be determined as a cash dividend upon approval of the transaction.
Separately, Frontier will increase the reverse termination fee to 350 million dollars in the case that the merger is not consummated for antitrust reasons. The figure represents an increase of one hundred million over the previous agreement. In addition, the number of Frontier-nominated directors of the combined company will increase by one and the number of Spirit-nominated directors will decrease by one.
The consideration, they said, offers «compelling» value, as well as allowing them to maintain ownership of the company against a backdrop of good growth prospects for the industry. Air traffic volume in the United States has already matched, and at times exceeded, that of 2019. Moreover, airline unit revenues reached their highest levels in ten years. For that reason, JetBlue remains interested in acquiring the company.
Both bidders see Spirit as an opportunity to expand their presence in the domestic market at a time of shortage of personnel and aircraft to meet increased travel demand. Either merger would create the fifth largest U.S. airline.
Over the past several weeks, Spirit’s Board of Directors undertook an exhaustive process of consideration of both proposals. Financial conditions, regulatory risks and integration processes were analyzed.
Finally, and according to reports, Spirit’s Board of Directors determined that the offer received from JetBlue «is not a superior proposal» and recommended, once again, to formalize the agreement with Frontier. In this regard, the analysis considered that the merger with JetBlue would increase the concern of regulators about the concentration of the airline industry, due to the company’s association with American Airlines, known as the Northeast Alliance.
In an official statement issued late last Friday, JetBlue said it continued to believe its proposal was superior, but would review and evaluate the revised terms of Frontier’s proposal.
