In a press release, the Denver-based airline announced they would pay a $250 million reverse termination fee to Spirit Airlines if their merger is broken up for antitrust reasons.
Reverse Termination Fee Added as a Stockholder Protection
According to Spirit executives, while the merger proposal is being well received by the company’s shareholders, their biggest concern is protecting their value in the event the merger doesn’t go through. Because the two carriers would form America’s largest ultra-low-cost-carrier, the deal could potentially attract increased scrutiny from both the U.S. Department of Justice and Department of Transportation.
“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,” Ted Christie, president and chief executive of Spirit, said in a press release. “After discussing this feedback with the Frontier Board and management team, we have agreed to amend the merger agreement.”
The airlines say the addition of a reverse termination fee is not an indication that the deal may not pass antitrust review. Instead, leaders at both companies say the agreement change is reflective of their “conviction that regulators will find this combination to be pro-competitive.”
While Frontier and Spirit continue to rally shareholders to approve the merger agreement, JetBlue is still campaigning for their proposal. In a statement responding to Frontier adding a reverse termination fee, the New York-based airline is accusing Spirit of not evaluating their offer in good faith.
“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,” the JetBlue statement reads. “Spirit had already admitted that its own prior unreasonably optimistic projections of receiving approval this year were in fact not accurate. Experts agree both transactions will receive the same level of scrutiny.”
Independent Proxy Firms Weigh in on Proposed Merger
The newest developments come as two independent proxy advisory firms are offering split opinions. Independent advisor ISS came out against the Frontier-Spirit deal, calling the JetBlue opportunity “superior from a financial standpoint. Glass, Lewis & Co. is backing the Frontier-Spirit merger, saying the equity-based deal gives shareholders “the option to participate in the potential future upside of the combined company, including the anticipated post-COVID recovery in the airline travel industry.”
Source: frugal travel guy