Frontier’s Spirit bid buoyed by new fee, Glass Lewis backing

Bloomberg

Frontier Group Holdings Inc sweetened the terms of its takeover offer for Spirit Airlines Inc and won support from a key proxy advisory firm, giving the ultra-discount carrier new momentum as it tries to fend off a rival bid by JetBlue Airways Corp.
Frontier agreed to pay $250 million, or $2.23 a share, to Spirit if the deal collapses because of objections from US regulators, the airlines said in a joint statement. Spirit had earlier rejected JetBlue’s offer, which includes a similar $200 million fee, over concerns that regulatory hurdles would prevent it from being completed.
The revised terms, which have been approved by the boards of both Frontier and Spirit, could help sway some shareholders ahead of a June 10 vote on the stock-and-cash deal initially valued at $2.9 billion. It would
combine carriers that offer bare-bones fares and charge for anything extra.
The agreement is “the best available and most actionable” alternative for Spirit shareholders, proxy analysis firm Glass Lewis & Co said in a report.
“There are likely few, if any, other logical potential acquirers that represent a better fit for the company than Frontier in terms of scale, operations, business model, geographic fit and regulatory certainty,” Glass Lewis said. While JetBlue’s offer is higher in value, it hasn’t sufficiently addressed Spirit’s concerns that the bid couldn’t win approval from federal antitrust enforcers, it said.
The Glass Lewis finding was based on “a remarkably superficial” analysis of regulatory issues involved in the bids, JetBlue said.
“The bottom line for Spirit shareholders is that the JetBlue proposal offers more value — a significant premium in cash — more certainty, and more benefits for all stakeholders,” the statement said.
The latest developments come several days after another proxy adviser, Institutional Shareholder Services Inc, recommended Spirit shareholders reject the Frontier takeover agreement as a signal to the board to engage more with JetBlue over its competing bid. It also noted the lack of a reverse termination payment at that time.
While both deals face regulatory risks, JetBlue’s all-cash offer was superior from a financial standpoint, ISS said. Spirit rejected JetBlue’s $3.6 billion
original offer, prompting a subsequent hostile $3.3 billion tender bid. A combination of Frontier and Spirit would become the fifth-largest US airline in terms
of domestic passenger traffic, jumping ahead of Alaska Air Group Inc and JetBlue.