Advisory Firm Now Favors JetBlue’s Bid for Spirit Airlines

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Frontier CEO Barry Biffle has said the airline’s latest offer for Spirit was its “last, best and final” proposal.

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(Photo by Brandon Bell/Getty Images)

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Institutional Shareholder Services is now recommending that shareholders vote against Spirit Airlines’ proposed deal with Frontier Group Holdings,

The shareholder advisory firm changed its opinion on the deal and said that it believes JetBlue Airways’ (JBLU) offer is a “superior alternative” and that Spirit (SAVE) investors should vote against the proposed deal with Frontier (ULCC).

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“Following Frontier’s statement that the current terms represent its best and final offer, the prepayment dividend and the reverse termination fee accompanying the JetBlue offer remain more favorable for Spirit shareholders than the corresponding provisions accompanying the Frontier agreement,” ISS wrote in a report Friday.

Shares of JetBlue were rising 3.4% to $8.18 on Friday. Spirit’s stock gained 1% while Frontier climbed 1.8%.

The offer from JetBlue to buy Spirit is currently at $33.50 a share in cash, incorporating a dividend of $2.50 a share upon shareholder approval and a monthly cash dividend of 10 cents a share beginning in January 2023. The Frontier merger consideration is $4.13 cash a share plus 1.9126 shares of Frontier for each Spirit Share. This includes a $2.22 per share dividend followingshareholder approval.

ISS added in its report that “although the value from JetBlue appears opportunistic when compared with standalone Spirit’s share price as recently as March 2021, market volatility in the intervening time, particularly due to recession fears, energy price shifts, and changes in interest rates, may lead shareholders to conclude that the certainty of value of the cash consideration is preferable to the potential upside of the Frontier deal.”

In a statementJetBlue said Friday it was “pleased that ISS chose to formally update its recommendation to Spirit shareholders to vote against the Frontier transaction.”

“We remain confident that Spirit shareholders continue to overwhelmingly recognize the clear superiority of our proposal, and strongly encourage them to vote against the Frontier transaction,” JetBlue added.

Frontier Chief Executive Barry Biffle previously said in a letter that Frontier’s latest offer for Spirit was its “last, best and final” proposal, and asked Spirit’s board to publicly reaffirm its commitment to that deal.

Spirit said earlier this week that it was moving to July 27 a special shareholder meeting to vote on its proposed merger with Frontier that had been scheduled for Friday. The discount airline said that it will continue discussions with both Frontier and JetBlue.

JetBlue’s Chief Executive Officer Robin Hayes said that same day that the airline “is now standing ready to enter into a binding merger agreement with Spirit as soon as practicable and at the latest, immediately following Spirit shareholders voting against the Frontier transaction on July 27.”

Write to Angela Palumbo at [email protected]


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