Frontier Group Holdings Inc. has upped the deal to snap up Spirit Airlines Inc. as the two ultra-low-cost airlines try to elbow JetBlue Airways Corp. out of their merger amid a surge in air travel this summer and rising ticket prices.
Spirit SAVE, +2.90% late Friday said Frontier ULCC, +6.57% raised its per-share offer and also the fee it would pay in the “unlikely event” that their merger doesn’t pass muster with antitrust regulators.
Spirit’s stock tumbled 9.1% in premarket trading Monday, to pull back from Friday’s two-month closing high. Shares of Frontier and JetBlue JBLU, +5.77% were still inactive ahead of Monday’s open.
Based on Frontier’s “improved terms,” Spirit’s board said it reiterates a unanimous recommendation that Spirit shareholders vote for the merger with Frontier, the company said.
The board considered JetBlue’s revised proposal, received Monday.
Executives discussed it with JetBlue and after the discussions and review “Spirit’s board of directors determined JetBlue’s revised offer is not a superior proposal,” the airline said.
“The board believes a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders and has a greater likelihood of closing,” Spirit said.
A merger with JetBlue, on the other hand, likely would not “overcome regulatory objections,” Spirit said.
The companies announced their intention to merge in February. JetBlue surprised markets with its own proposal in April, an all-cash bid that raised eyebrows at the time for being more likely to run afoul of antitrust.
Under the new terms disclosed Friday, Frontier will increase the per-share cash consideration payable to Spirit shareholders to $4.13 in cash, in addition to the per-share stock consideration of 1.9126 shares of Frontier previously agreed.
Under the February proposal, Spirit shareholders would receive the 1.9126 Frontier shares plus $2.13 in cash for each share owned.
Frontier also agreed to increase the reverse termination fee to $350 million to Spirit.
Airlines have been buoyed by “revenge air travel,” or the pent-up demand for flights post air-travel restrictions related to the pandemic, especially for domestic flights and flights to close by resort destinations.