Frontier Offers Spirit $250 Million Break-Up Fee If Deal Fails

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The negotiations for the acquisition of Spirit Airlines are intensifying between the two carriers in contention, Frontier Airlines and JetBlue Airways. Both airlines have now offered termination fees of at least $200 million if federal antitrust regulators don’t allow the industry reshaping merger to take place.

Frontier Airlines is now offering $250 million as a reverse termination fee to Spirit Airlines. The fee was added to the amended $2.9 billion offer as a response to Institutional Shareholder Services (ISS) Inc., a proxy advisory firm, imploring Spirit shareholders to vote against a potential Frontier-Spirit merger. ISS felt that there was cause for concern that the Spirit board decided against auctioning off the airline. The firm also felt any agreement should include a guarantee of value for shareholders.

Ted Christie, President and CEO of Spirit, said:

“Since announcing our transaction with Frontier, we have had extensive constructive conversations with our stockholders, who have expressed support for the strategic rationale of our combination but a desire for additional stockholder protections. After discussing this feedback with the Frontier Board and management team, we have agreed to amend the merger agreement.”

JetBlue sent out a release to comment on the Frontier’s amended offer. Notably, the New York-based airline stated, “The addition of a reverse termination fee in the face of a likely defeat is simply an acknowledgement that the regulatory profiles and timelines of both deals are indeed similar.” JetBlue had already attached a $200 million reverse termination fee to its $3.3 billion offer for Spirit.

Spirit rejected JetBlue’s offer, arguing that federal regulators wouldn’t allow the merger without JetBlue making more concessions. Spirit shareholders are scheduled to vote on the Frontier’s offer on Friday, June 10. If the deal is approved, the merged Frontier-Spirit airline would be the fifth-largest in the United States.