Jun 28, 2022 - Economy & Business

Spirit Airlines takeover fight heads to a vote

Illustration of Ben Franklin looking out of a plane window.
Illustration: Shoshana Gordon/Axios

When most Americans talk about airlines right now, their focus is on flight delays and cancellations. But there's also a contentious merger battle that could reshape U.S. air travel for years to come.

Driving the news: Spirit Airlines shareholders this Thursday will vote on a takeover offer from rival budget carrier Frontier Airlines, which Spirit's board is supporting over a rival bid from JetBlue.

The big picture: Buying Spirit would make either Frontier or JetBlue the fifth-largest U.S. airline, which almost certainly would invite antitrust scrutiny (particularly if JetBlue prevails, given that it's already been sued by the DOJ over its alliance with American Airlines). It also could kick off a new wave of carrier consolidation.

How we got here: This has been a very indirect flight, so a quick timeline:

  • In February, Spirit and Frontier announced a $2.6 billion cash-and-stock merger that expanded to $6.6 billion once debt and lease liabilities were included.
  • In April, JetBlue made an unsolicited $3.6 billion, all-cash bid.
  • In early May, Spirit rejected JetBlue's offer, saying it was unlikely to pass antitrust review. JetBlue responded by effectively going hostile, urging Spirit shareholders to reject the Frontier bid.
  • After that, Frontier and JetBlue engaged in a game of incremental one-upmanship. This included increased per share bids, escalating breakup fees and cash dividends.
  • Spirit even pushed back the initial shareholder vote, which had been scheduled for earlier this month, as the two suitors kept sweetening their offers.

Where things stand: Frontier's final bid, which arrived last Friday, is $4.13 per share, which is $2 per share higher than its original entry and includes $2.22 per share as a pre-paid cash dividend.

  • JetBlue increased its offer again just yesterday, raising its breakup fee to $400 million from $350 million and its cash dividend to $2.50 from $1.50. It also tacked on a 10 cent per share monthly dividend, or ticking fee, until deal completion or termination.
  • Shareholder proxy firms ISS and Glass Lewis now both support Frontier's bid. ISS had originally urged Spirit shareholders to reject it.

The bottom line: Spirit shareholders finally get their say on Thursday, but regulators will have the final word.

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