Frontier & Spirit Add Reverse Termination Fee To Merger Agreement

Frontier & Spirit Add Reverse Termination Fee To Merger Agreement

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There’s an interesting update when it comes to Frontier’s takeover of Spirit, especially as JetBlue is attempting a hostile takeover of Spirit…

Frontier offers $250 million reverse termination fee to Spirit

Spirit and Frontier have made an amendment to their previously announced merger agreement. Under the new terms, which have been unanimously approved by the board of directors of both companies, Frontier would pay a reverse termination fee of $250 million (or $2.23 per share) to Spirt “in the unlikely event the combination is not consummated for antitrust reasons.”

Here’s how Ted Christie, Spirit Airlines CEO, describes this development:

“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. We look forward to closing the transaction and bringing more ultra-low fares to more people in more places.”

Meanwhile Mac Gardener, Chairman of the Board of Spirit Airlines, said the following:

“The combination of a higher reverse termination fee and a much greater likelihood to close in a Frontier merger provides substantially more regulatory protection for Spirit stockholders than the transaction proposed by JetBlue. We look forward to closing the transaction with Frontier and giving Spirit stockholders the opportunity to benefit from pandemic recovery and share in approximately $500 million in annual net synergies.”

Frontier and JetBlue are competing for Spirit

Why this reverse termination fee is being added now

Since Frontier seems determined to buy Spirit, and Spirit seems determined to be purchased by Frontier rather than JetBlue, this seems like a smart move.

For context, in February 2022 it was announced that Frontier intended to acquire Spirit. Then in April 2022, JetBlue swooped in and also made a bid to acquire Spirit, in what the airline positioned as a superior proposal. Spirit ended up rejecting JetBlue’s takeover bid, not because the offer isn’t better (in theory), but rather because it provides more uncertainty.

While JetBlue’s offer is almost unarguably better on paper, the catch is that Spirit has concerns about getting regulatory approval for such a merger. The way Spirit views it, regulators would view these two deals differently.

Two (mostly complementary) ultra low cost carriers merging is different than JetBlue taking over an ultra low cost carrier and probably raising fares. After all, many of us hope that JetBlue won’t become Spirit (not because Spirit doesn’t have an important position in the market, but rather because JetBlue offers a unique inflight experience).

JetBlue didn’t want to take no for an answer. So with Spirit’s board rejecting JetBlue’s offer, the airline instead decided on a hostile takeover approach, by appealing directly to Spirit shareholders and encouraging them to vote in favor of a JetBlue takeover. Spirit then once again rejected this offer publicly.

Spirit’s shareholders will soon be voting on this deal, and one point of feedback has been that there’s also uncertainty as to whether a merger between Frontier and Spirit would be approved. The focus has been on how regulators may not approve a merger between Spirit and JetBlue, with little concern given for approval of a merger between Spirit and Frontier.

This added reverse termination fee at least gives Spirit shareholders a bit more certainty with the Frontier merger. Even though there’s not as much upside as with the JetBlue merger, at least this addresses concerns about regulatory approval.

JetBlue won’t be happy about this…

Bottom line

Frontier has improved its offer to acquire Spirit, in the form of a new $250 million reverse termination fee. While JetBlue wants in on the action, Frontier and Spirit seem committed to one another. If Frontier wants the support of Spirit shareholders, this seems like a smart development.

What do you make of Frontier adding a new reverse termination fee?

Conversations (13)
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  1. John S Guest

    I for one hope Frontier gets Spirir:It’s a Win in my mind, an airline for the unwashed, unruly masses and one I would never fly on

    1. Eric D Guest

      Spoken like a stereotypical Xenophobe. Newsflash, John you’re already a member of the unwashed, unruly masses. They’re on EVERY airline in this country - including the three legacy carriers. AA DL & UA.

  2. Stockholder & Customer of NK, F9, B6 Guest

    I voted against the Fronter purchase of Spirit. Others should too.

    Spirit needs neither Frontier nor Jetblue. Spirit's current management is more competent, and its product/service/route offerings are better than Frontier's.

    Jetblue's strategy for Spirit makes little sense. However, Jetblue's objections to Spirit's board make sense, especially regarding acquiescing somewhat readily to Frontier's bid. Spirit's board is affiliated with Bill Franke/ Indigo Partners, Spirit's former owner, and Frontier's current majority owner.

    Frontier...

    I voted against the Fronter purchase of Spirit. Others should too.

    Spirit needs neither Frontier nor Jetblue. Spirit's current management is more competent, and its product/service/route offerings are better than Frontier's.

    Jetblue's strategy for Spirit makes little sense. However, Jetblue's objections to Spirit's board make sense, especially regarding acquiescing somewhat readily to Frontier's bid. Spirit's board is affiliated with Bill Franke/ Indigo Partners, Spirit's former owner, and Frontier's current majority owner.

    Frontier is just not paying adequately to Spirit's shareholders.

  3. Cat Guest

    The major concern is that neither Frontier nor JetBlue turn into Spirit, which I sued & won & have happily agreed I would never fly again. So I"m banned for life from a cattle transport with wings.
    Frontier already screwed Midwesterners when they took over Midwest Airlines. How much more misery are they going to be allowed to visit on travelers?
    I really don't care about Spirit loyalists. You get what you pay for.

    1. Flyer Guest

      Curious, can you share the circumstances that led to your lawsuit or was it just arbitration+NDA?

    2. Eric D Guest

      Since when is Frontier taking over Midwest new? M&A’s in the airline biz. (any biz. for that matter) have been occurring since christ was a child. @ one point in this country, there were over 35 mainline jet airlines. (That, WAS competition, & what you’d have if this merger goes through. Competition to take on the big three legacies that are AA DL & UA.) Continental by UA, the aforementioned Frontier by People’s Exp., US...

      Since when is Frontier taking over Midwest new? M&A’s in the airline biz. (any biz. for that matter) have been occurring since christ was a child. @ one point in this country, there were over 35 mainline jet airlines. (That, WAS competition, & what you’d have if this merger goes through. Competition to take on the big three legacies that are AA DL & UA.) Continental by UA, the aforementioned Frontier by People’s Exp., US Airways by AA, Northwest Orient by DL, TWA by Eastern. And on & on & on ….

  4. DaninMCI Guest

    As a stockholder and Spirit loyalty customer, I would be for the Frontier bid if I knew they wouldn't take away the big front seats and make the customer experience worse like it is on Frontier. The way I see it is that JetBlue has a larger international outlook with more chance to grow the business while filling in Jetblue's lack of Midwest USA routes. Frontier routes match up a bit better for regulatory approval...

    As a stockholder and Spirit loyalty customer, I would be for the Frontier bid if I knew they wouldn't take away the big front seats and make the customer experience worse like it is on Frontier. The way I see it is that JetBlue has a larger international outlook with more chance to grow the business while filling in Jetblue's lack of Midwest USA routes. Frontier routes match up a bit better for regulatory approval purposes but I don't like flying on Frontier's product or the delays in Denver that I ALWAYS seem to experience.

    1. mbg Guest

      What do you mean when you say "Frontier routes match up a bit better for regulatory approval purposes?" Frontier and Spirit have MORE overlap, which would lead to worse prospects of regulatory overlap.

      JetBlue + Spirit overlapped on just 11% of scheduled routes in 2021, while Frontier + Spirit was 18%. In # of routes, JetBlue + Spirit overlap on just 48 nonstop routes compared to Frontier + Spirit overlapping on 76 nonstops.

    2. Eric D Guest

      Just exactly what the article said. JB (B6) is a more expensive carrier because of its “in flight cabin offerings/srcvs.” Frontier (F9) & Spirit (NK) do not offer those perks, as both are ULCC - Ultra Low Cost Carriers. DOJ approval is much more likely for the F9 & NK merger. Primarily because you’d have two ULCC, F9 & NK competing against the big three & others like SWA . As B6 (JB) will NOT...

      Just exactly what the article said. JB (B6) is a more expensive carrier because of its “in flight cabin offerings/srcvs.” Frontier (F9) & Spirit (NK) do not offer those perks, as both are ULCC - Ultra Low Cost Carriers. DOJ approval is much more likely for the F9 & NK merger. Primarily because you’d have two ULCC, F9 & NK competing against the big three & others like SWA . As B6 (JB) will NOT be lowering its prices or “in flight cabin offerings/srcvs.” to cater/serve to NK (Spirit) pax. B6 will only skyrocket fares & rid the flying public of one more competitive low fare price saving airline for consumers.

    3. Eric D Guest

      Delays ? Got to tell you that’s a part of flying these days. Particular if you fly out large hub congested airports, that lack the land to add runways, concourses terminals & the like. JFK, ATL, DFW, LAX, ORD, MIA, SFO & LGA. The exception airport in this country? DEN sits on 52 sq. miles, & is the second biggest airport in the world (third busiest by pax.) & @ full build out can have...

      Delays ? Got to tell you that’s a part of flying these days. Particular if you fly out large hub congested airports, that lack the land to add runways, concourses terminals & the like. JFK, ATL, DFW, LAX, ORD, MIA, SFO & LGA. The exception airport in this country? DEN sits on 52 sq. miles, & is the second biggest airport in the world (third busiest by pax.) & @ full build out can have 12 runways & handle over 110 M pax. DEN just added 39 new aircraft gates, is expanding its security queues & expanding its people mover trains.

      But to your comparison point of carriers. The seats on Frontier & Spirit are no different. Very narrow, w little pitch to be had. And biz. models are EXACTLY alike. Pay À la carte for everything after the initial travel tix. is purchased. Their merger has far more chance to pass muster w the DOJ, as they’re two competing ULCC’s that will make them stronger as one to take on the big three large legacy price gouging carriers. AA DL & UA. And, SWA to some extent. jetBlue is like those four, they aren’t interested in becoming a ULCC company, like Spirit. They just want to break it apart, & offer one less low fare no frills choice/option to the flying pax.

  5. Brent Guest

    Too little too late….
    But I thought the Spirit BOD said Frontier had the superior offer and had a great chance to pass DOJ scrutiny.

    Especially after the ISS had come out and said they would recommend the jetblue offer as being superior, noted that Frontier didn’t have a “break up / termination” fee that jetblue had as well as other factors in their reasoning. It just makes the decisions by the Spirit...

    Too little too late….
    But I thought the Spirit BOD said Frontier had the superior offer and had a great chance to pass DOJ scrutiny.

    Especially after the ISS had come out and said they would recommend the jetblue offer as being superior, noted that Frontier didn’t have a “break up / termination” fee that jetblue had as well as other factors in their reasoning. It just makes the decisions by the Spirit BOD worse and gives credibility to what jetblue has been saying….

    Either way I guess we will see what happens on June 10th.

    1. Eric D Guest

      Frontier just added a $250 M break up fee, which would add an additional $2.33 to Spirit shareholders if the deal isn’t consummated.

    2. Brent Guest

      Jetblue upped their termination fee to $350 million with a $1.50/share advance once a deal is approved by spirit. Plus Frontier said they are done and won’t increase their offer in an SEC filing.
      Now Spirit BOD has delayed the Frontier vote till June 30th. Yea think the BOD saw how the votes were coming and was getting some serious pressure from the large investors.
      Guess we will see how things plays out,...

      Jetblue upped their termination fee to $350 million with a $1.50/share advance once a deal is approved by spirit. Plus Frontier said they are done and won’t increase their offer in an SEC filing.
      Now Spirit BOD has delayed the Frontier vote till June 30th. Yea think the BOD saw how the votes were coming and was getting some serious pressure from the large investors.
      Guess we will see how things plays out, but kinda looks like the Spirit BOD might be interested in talking to Jetblue now and maybe try to negotiate their “golden parachutes”.

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Brent Guest

Jetblue upped their termination fee to $350 million with a $1.50/share advance once a deal is approved by spirit. Plus Frontier said they are done and won’t increase their offer in an SEC filing. Now Spirit BOD has delayed the Frontier vote till June 30th. Yea think the BOD saw how the votes were coming and was getting some serious pressure from the large investors. Guess we will see how things plays out, but kinda looks like the Spirit BOD might be interested in talking to Jetblue now and maybe try to negotiate their “golden parachutes”.

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Eric D Guest

Frontier just added a $250 M break up fee, which would add an additional $2.33 to Spirit shareholders if the deal isn’t consummated.

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Eric D Guest

Delays ? Got to tell you that’s a part of flying these days. Particular if you fly out large hub congested airports, that lack the land to add runways, concourses terminals & the like. JFK, ATL, DFW, LAX, ORD, MIA, SFO & LGA. The exception airport in this country? DEN sits on 52 sq. miles, & is the second biggest airport in the world (third busiest by pax.) & @ full build out can have 12 runways & handle over 110 M pax. DEN just added 39 new aircraft gates, is expanding its security queues & expanding its people mover trains. But to your comparison point of carriers. The seats on Frontier & Spirit are no different. Very narrow, w little pitch to be had. And biz. models are EXACTLY alike. Pay À la carte for everything after the initial travel tix. is purchased. Their merger has far more chance to pass muster w the DOJ, as they’re two competing ULCC’s that will make them stronger as one to take on the big three large legacy price gouging carriers. AA DL & UA. And, SWA to some extent. jetBlue is like those four, they aren’t interested in becoming a ULCC company, like Spirit. They just want to break it apart, & offer one less low fare no frills choice/option to the flying pax.

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