Bidding war escalates, as Spirit Airlines again delays final decision on Frontier merger

For the second time this month, Broward County’s Spirit Airlines has delayed a final decision on whether to go ahead with a planned merger with Frontier Airlines.

On Wednesday night, less than 24 hours before Spirit’s shareholders were supposed to vote on the proposed combination with the Denver-based discount carrier, Spirit said it postponed the special meeting of shareholders to vote on the deal until July 8.

Spirit said in a prepared statement it was delaying the shareholders’ tally so the airline’s board of directors can continue discussions with Frontier and New York-based JetBlue Airways. The vote originally was set for June 10, before Spirit had delayed it until June 30.

Frontier and JetBlue are engaged in a fierce bidding war for Miramar-based Spirit, which is known for its rock-bottom fares and no-frills amenities. The airline employs 3,400 people in South Florida and commands the top spot for its share of the airline passenger market at Fort Lauderdale-Hollywood International Airport. At Miami International Airport, Spirit is the distant No. 2 carrier behind American Airlines.

The tug of war between the airlines started after Spirit and Frontier announced in February they would merge to create a national discount airline. Frontier made a cash-and-stock offer for Spirit that was valued then at around $2.9 billion and would give Frontier controlling ownership. Combining the two airlines would create the fifth-largest U.S. airline, trailing the big legacy carriers American Airlines, Southwest, Delta and United.

JetBlue launched a hostile cash takeover bid in April, and since then boosted it to $3.64 billion or $33.50 for each share of Spirit’s stock, a significant premium over Frontier’s offer which based on stock prices has fluctuated between roughly $2.4 billion and $2.9 billion.

Spirit’s CEO Ted Christie has criticized JetBlue’s motivation — on Wednesday night in a live interview on Yahoo Finance he said the rhetoric from JetBlue’s CEO “appears childish” — and urged Spirit’s shareholders to stick with voting for the Frontier merger.

JetBlue’s CEO Robin Hayes called his airline’s offer for Spirit “clearly” superior to Frontier’s bid.

Christie and Spirit’s board, as well as airline industry analysts, have said federal regulators likely would not ever give final clearance for JetBlue to acquire Spirit, due to anti-competitive concerns and fears that such a deal would lead to higher customer airfares.

Realizing those concerns, JetBlue is offering Spirit a $400 million breakup fee — a boost from $350 million — should Spirit accept its bid and regulators not approve it. On Tuesday, JetBlue improved its offer by saying it would pay Spirit’s shareholders $2.50 a share in an advance payment — up from $1.50 a share — starting in 2023 and until a deal would be completed or terminated.

On Friday, Frontier had sweetened its offer. Frontier boosted the cash portion of its bid by $2 to $4.13 per share of Spirit stock. In addition to the cash bump, the share consideration portion remains that Spirit shareholders would receive 1.9126 of Frontier shares for each of their Spirit shares. And Frontier increased the amount it would pay Spirit in a deal breakup fee to $350 million, up from $250 million, if federal regulators eventually won’t approve a Spirit-Frontier merger.

Spirit said in a statement on Friday its board continues to unanimously recommend that shareholders vote to go through with the merger. However, it’s clear JetBlue remains a contender since Spirit said in its Wednesday statement that the company’s board was continuing to have conversations with JetBlue and Frontier.

But in an interview this week with the New York Times, Spirit’s CEO made his most blunt statement yet about how he views the endgame in this takeover battle.

“If our shareholders don’t approve the Frontier deal, we’re back to a stand-alone,” Christie said. “We have made clear the issues that we have with the JetBlue transaction.”

Institutional Shareholder Services, the influential corporate governance company, has said it supports a merger of Spirit and Frontier.