Durrant Pate/Contributor

The buying war for American low-cost carrier, Spirit Airlines, wages on with Frontier Airlines upping the ante over Jet Blue yesterday (June 24).

Frontier Airlines has increased its offer for Spirit Airlines, less than a week before Spirit shareholders vote on whether to approve the proposed merger. The increased offer, which is detailed in a Securities and Exchange Commission (SEC) filing late yesterday would see Spirit shareholders get a total of US$4.13 in cash per share if the merger is completed.

This is an improvement of US$2 from the previous offer. Spirit shareholders would additionally still receive shares of Frontier as part of the payment. The new offer comes after Spirit showed signs of growing openness to JetBlue’s unsolicited offer.

The new offer stipulates that US$2.22 per share of the total cash amount would be paid before the merger closes as a dividend. However, JetBlue’s all-cash offer would give Spirit shareholders US$33.50 per share, but no stock in the combined airline, a deal valued at about US$3.6 billion. 

Spirit vs. Jetblue’s offer

Frontier’s original offer was valued at US$2.9 billion but has lost some value because of a decline in stock prices. Frontier also increased its proposed early termination fee to US$350 million, in the event that the Department of Justice rejects the merger on antitrust grounds, an increase of US$100 million over the previous offer.

Spirit postponed its shareholders vote from earlier this month to June 30 in order to give the board more time to consider JetBlue’s offer, while the budget carrier also provided due diligence to the JetBlue team.

Spirit’s board has suggested shareholders adopt the Frontier agreement, arguing that there’s a greater likelihood that regulators would reject a merger with JetBlue. Spirit board chairman, Mac Gardner said in a statement, “the board is confident a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders, with more certainty and the strongest likelihood of closing.”

He added that, “a merger with Frontier poses less regulatory risk on Spirit stockholders and increases competition in the industry for the benefit of consumers.”