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Bloomberg
JetBlue Airways Corp improved its offer for Spirit Airlines Inc, boosting a breakup provision to $350 million and adding an upfront cash payment days before shareholders will vote on a pending buyout agreement with Frontier Group Holdings Inc.
The revised offer increases JetBlue’s reverse breakup fee by $150 million and provides for about $164 million payable as a cash dividend “promptly following†a vote approving a combination of the carriers, the airline said in a statement. That pushes the total value of the proposal to about $3.4 billion.
Spirit said in a separate statement that its board would evaluate the updated terms with its financial and legal advisers.
The moves come after Frontier sweetened its own agreement by adding a key $250 million fee payable to Spirit if their accord breaks up on antitrust grounds.
A review of the two revised bids led prominent proxy advisory firm Institutional Shareholder Services (ISS) to reiterate its opposition to the Frontier offer. “JetBlue’s meaningfully larger reverse termination fee, coupled with the $1.50 per share prepayment, tips the scales in JetBlue’s favor,†ISS said. Spirit shareholders “may well prefer†a delay in the scheduled vote so the carrier’s board can negotiate with JetBlue, it said.
JetBlue is aiming to lure Spirit’s board into talks over the new proposal while also building more support among Spirit shareholders for its all-cash offer ahead of a June 10 ballot. It needs them to vote against Frontier’s stock-and-cash deal, initially valued at $2.9 billion, to preserve its best chance for a quick infusion of growth that will help it compete against larger US carriers. Spirit rejected JetBlue’s initial $3.6 billion offer, prompting a subsequent $3.3 billion hostile tender bid.
Frontier didn’t respond to a request for comment on the new offer. Adding the upfront $1.50-a-share payment from JetBlue addresses concerns that Spirit shareholders would have to wait through a lengthy regulatory review of the combination before receiving any cash.
Spirit shareholders are faced with conflicting recommendations from prominent shareholder advisory firms. An initial ISS report found JetBlue’s offer superior from a financial standpoint and said that both bids have inherent risks when it comes to federal antitrust reviews.