Spirit pushes merger vote back for fourth time as Frontier deal looks shaky
The merger deal between Frontier Airlines and Spirit Airlines looks like it could be in jeopardy.
A fourth delay to the shareholder vote was announced Wednesday after Frontier sent a letter to Spirit earlier this week acknowledging difficulties in gaining approval for the deal and asking for the delay. The vote, at a special shareholder's meeting, will now take place on July 27, though there's been a precedent for delays.
"We still remain very far from obtaining approval from Spirit stockholders based on the proxy data we received as of July 8, 2022," Frontier CEO Barry Biffle wrote on Sunday to Spirit CEO Ted Christie and senior vice president Thomas Canfield.
Spirit's shareholders must choose between voting to accept a merger deal with Frontier that was announced in February or voting against it — an implicit seal of approval for a competing deal to acquire the ultra-low-cost carrier by JetBlue.
JetBlue's offer is for $33.50 per share, valuing the company at about $3.7 billion — significantly more than the merger deal with Frontier. Should Spirit back out of its merger agreement with Frontier, it would owe the company $94.2 million.
Separately, on Tuesday, one of Spirit's institutional shareholders sent a letter to board chairman Mac Gardner urging the airline to abandon the Frontier merger and to accept JetBlue's proposal.
Read More: JetBlue vs. Frontier: Who will win the battle over Spirit and why does it matter?
"[Spirit]'s Board still refuses to recognize the superiority of the JetBlue bid and continues to recommend [Spirit] shareholders vote for the economically inferior Frontier Merger proposal," Discovery Capital Management wrote. Discovery owns about 1.4% of Spirit's shares.
Regardless of how shareholders vote, both proposals face regulatory uncertainty.
Analysts believe that the Frontier merger would more likely be approved by the Department of Justice's antitrust division than the JetBlue acquisition offer. JetBlue has offered to divest assets in the Northeast, where it currently cooperates in a strategic partnership with American Airlines. Both proposals come with reverse breakup fees payable to Spirit in the event regulators block the deal: $450 million if the JetBlue deal is blocked and $350 million if the Frontier deal is blocked.
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