An influential shareholder advisory service, the Institute Shareholder Service, after Frontier has increased its offers, voted Spirit Airlines investors for a merger with Frontier Airlines rather than a rival offer from JetBlue Airlines. I advise you to throw it.
The recommendation filed on Friday is a reversal of the ISS, which had previously advised Spirit shareholders to vote against a deal with fellow low-cost carrier Frontier. This is in the midst of a fierce bidding war between JetBlue and Frontier prior to the June 30 Spirit Shareholders’ Vote. Many large investors take the ISS recommendations seriously when deciding how to vote for corporate proposals, board candidates, and other matters.
“Shareholders are best served by making transactions that offer the best combination of long-term value and compensation in the event of a regulatory denial,” the ISS writes. “After all, we guarantee support for the merger with Frontier under the revised terms.”
Earlier this week, JetBlue raised its full cash offer by $ 2 per share to $ 33.50, for a total of about $ 3.7 billion. It also offered additional concessions, such as further sales, to ensure regulatory approval, given that transactions could face strict antitrust scrutiny. On Friday, Frontier also raised the cash portion of its bid from $ 2 to $ 4.13 per share, along with a share component equivalent to Frontier’s 1.9126 shares for each share of Spirit. The deal will value the spirit at around $ 2.7 billion, based on Friday’s stock price.
Frontier’s bids initially put less emphasis on spirit, but Frontier argues that the share portion of the offer will allow Spirit’s shareholders to further benefit if the merged company’s share increases. I am. He also attacked JetBlue’s bid, saying it was unlikely to get regulatory approval.
Airlines analysts generally agree that the spirit-frontier merger will be easier to carry out as airlines operate similar low-cost business models with different geographic strengths.
Both transactions will face considerable scrutiny from the Biden administration, which is taking a more aggressive stance on antitrust issues. Both proposals offer a $ 350 million “reverse termination fee” where the buyer pays the Spirit $ 350 million if the regulator blocks the transaction. Both airlines offer prepayments to Spirit shareholders. Frontier promises $ 2.22 per share and JetBlue promises $ 1.50.
Spirit and Frontier have announced a proposal to merge in February. A few weeks later, JetBlue countered with its own offer. Spirit’s board rejected the offer and urged shareholders to reject JetBlue’s subsequent bids for acquisition, and the deal was unlikely to be approved by antitrust regulators, hindering the merger with Frontier. He argued that it might just represent a “cynical attempt” to do.
