Spirit Airlines is the subject of a new round of intense bidding.
The Spirit board reiterated its preference for Frontier over a competing offer from JetBlue Airways after Frontier Airlines increased its cash offer and increased the breakup fee on Friday.
Frontier increased its initial offer by $2 per share, bringing it to $4.13 in cash and 1.9126 Frontier shares for each Spirit share.
The airline, located in Denver, increased its planned breakup payment to Spirit, based in Miramar, Florida, from $250 million to $350 million, matching JetBlue’s proposal.
Given the improved conditions, Spirit claimed that its board unanimously recommended that shareholders accept the Frontier offer at a special meeting on Thursday.
With a higher value, more money, “more certainty,” and “more regulatory protections,” JetBlue said that its proposition is still superior to Frontiers.
The latest gamble in a battle between Frontier and JetBlue to control the biggest cheap carrier in the country was Frontier’s move. JetBlue, located in New York, increased its all-cash offer on Monday to $33.50 per share, or more than $3.6 billion.
JetBlue’s proposition is more valuable at the moment. JetBlue wants to acquire all of Spirit’s stock and redesign Spirit’s aircraft to fit more comfortably in JetBlue’s fleet.
Spirit stockholders would receive 48.5% of the new, combined airline, which has not yet been given a name, under Frontier’s stock-and-cash offer. Accordingly, if the stock price increases significantly, investors who are ready to hold the stock may end up making a profit.
Another justification given by Spirit’s board for choosing Frontier is that it, like Spirit, is an ultra-low-cost carrier that offers really low rates but also a lot of additional expenses. According to Spirit, it is extremely improbable that antitrust authorities will let JetBlue acquire Spirit and eliminate its low-cost offerings from the market.
JetBlue disagrees with Spirit’s assessment. Bypassing Spirit’s board, it made a direct plea to Spirit shareholders, urging them to turn down the Frontier offer.
One point on which Frontier and JetBlue agree is that acquiring Spirit would strengthen their position as rivals to the nation’s top four airlines—American, Delta, United, and Southwest.
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