Spirit Airlines Investors Appreciate Latest Frontier Offer

Frontier Airlines’ decision to sweeten its offer for Spirit Airlines paid off on Friday when an investor advisory firm recommended the deal to Spirit shareholders.

Glass Lewis backed the deal after Frontier added a $250 million break fee to the February agreement between the boards of the two low-cost airlines.

The company said a competing offer from JetBlue exceeds the current value of the Frontier deal “by a fairly wide margin,” but JetBlue has not presented a compelling case to negate Spirit’s argument that antitrust regulators would block a sale to JetBlue.

Glass Lewis said Frontier “probably has an easier path to” a deal than JetBlue, and the company said it was encouraged by the addition of a severance fee to give Spirit shareholders greater protection against the risk of regulators blocking the sale to Frontier.

JetBlue said Frontier and Spirit only added the breakup fee when it became clear that Spirit shareholders would vote against their merger. JetBlue has 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 its value plummeted as Frontier’s shares tumbled. However, this would allow Spirit shareholders to retain 48.5% of the combined company.

JetBlue disputed Glass Lewis’ findings, saying the company conducted “a remarkably cursory regulatory analysis.” He said Glass Lewis approved Frontier’s offer even as the company acknowledged Spirit’s board had not determined whether JetBlue’s offer came with better financial terms.

Before Frontier added the break fee to its stock and cash offering, advisory firm Institutional Shareholder Services Inc. recommended that Spirit shareholders vote against Frontier’s offer and pressured Spirit’s board to negotiate with JetBlue.

Shares of Spirit Airlines Inc. fell 2%, Frontier Group Holdings fell 4% and JetBlue Airways Corp. was almost flat in afternoon trading on Friday amid a massive sell-off in the market.

Robert D. Coleman