Spirit Airlines investors like Frontier’s latest bid

Spirit Frontier JetBlue
A Spirit Airline aircraft approaches Philadelphia International Airport Friday, Oct. 22, 2021.

The decision by Frontier Airlines to sweeten its offer for Spirit Airlines paid dividends Friday when an investor-advisory firm recommended the deal to Spirit shareholders.

Glass Lewis supported the deal after Frontier added a $250 million breakup fee to the February agreement between boards of both budget airlines.

The firm said a rival offer by JetBlue exceeds the current value of the Frontier deal “by a fairly wide margin,” but that JetBlue hasn’t made a compelling case to override Spirit’s argument that antitrust regulators would block a sale to JetBlue.

Glass Lewis said Frontier “likely has an easier path to closing” a deal than does JetBlue, and the firm said it was encouraged by the addition of a breakup fee to give Spirit shareholders more protection against the risk that regulators oppose the sale to Frontier.

JetBlue said Frontier and Spirit added the breakup fee only when it became clear that Spirit shareholders would vote down their merger. JetBlue included a $200 million fee to Spirit if regulators block its bid, which is worth more than $3 billion in cash.

Frontier’s offer was originally worth about $2.8 billion but has fallen in value as Frontier shares have slumped. However, it would let Spirit shareholders keep 48.5% of the combined company.

JetBlue disputed Glass Lewis’ findings, saying the firm conducted “a remarkably superficial regulatory analysis.” It said Glass Lewis endorsed the Frontier offer even as the firm acknowledged that Spirit’s board has not determined whether JetBlue’s bid carries better financial terms.

Before Frontier added the breakup fee to its stock and cash offer, advisory firm Institutional Shareholder Services Inc. recommended that Spirit shareholders vote down the Frontier bid and put pressure on Spirit’s board to negotiate with JetBlue.

Shares of Spirit Airlines Inc. fell 2%, Frontier Group Holdings dropped 4%, and JetBlue Airways Corp. was nearly unchanged in afternoon trading Friday amid a broader market sell-off.