The proposed merger of Spirit Airlines (SAVE) (S64) (OL8U) with Frontier is set for a shareholder vote on June 30, and the courtship for the air carrier keeps getting interesting.
Both Frontier (ULCC) (OVN) and JetBlue (JBLU) (DE:JAW) (GB:0JOT) have been looking for a deal with Spirit, and Thursday’s vote remains crucial.
Last Friday, Spirit announced an amended merger agreement with Frontier that included higher per share consideration and a reverse termination fee of $350 million. Additionally, Spirit’s Board has reiterated its recommendation for investors to adopt the merger with Frontier.
Spirit’s Board added that cash as well as stock consideration, combined with the upside of continued ownership, provides compelling value to Spirit’s investors.
Spirit’s President and CEO, Ted Christie, commented, “We are thrilled to announce the terms of Spirit’s amended agreement with Frontier, which includes nearly double the per-share cash consideration of our prior agreement with Frontier while still allowing stockholders to benefit from the economic upside of airline industry recovery.”
Meanwhile, JetBlue has commented on the revised agreement between Spirit and Frontier, saying, “The conflicted Spirit Board continues to rely on a series of mischaracterizations to justify an inferior deal – about the regulatory situation, that is at odds with the views of outside experts that our transaction can get done.”
JetBlue believes its proposal is better than Frontier’s even after the revised terms and added that it offers Spirit’s investors more value, cash, and certainty, as well as more regulatory protection.
Additionally, yesterday, proxy advisory firm Institutional Shareholder Services (ISS) recommended Spirit’s investors vote for the merger with Frontier. Earlier this month, another proxy advisory firm, Glass, Lewis & Co., had also recommended that Spirit’s investors vote in favor of the transaction.
ISS’s recommendation is a major u-turn over its earlier recommendation that Spirit’s investors vote against a deal with Frontier, and it comes after Frontier’s revised offer.
Analyst’s Take
Amid this bidding tussle, the Street has a Moderate Buy consensus rating on Spirit alongside an average price target of $26, implying a 6% potential upside.
J.P. Morgan’s Jamie Baker has a Buy rating on the stock with a price target of $30, which implies a 22.35% potential upside for Spirit.
Hedge Funds
Concurrently, hedge funds have increased holdings in the stock by 4.2 million shares in the last quarter, indicating a very positive hedge fund confidence signal in Spirit. Notably, Lee Ainslie’s Maverick Capital has initiated a position worth $433,179 in the stock.
Closing Note
All eyes will now be on the June 30 vote. Although Spirit delayed the vote to continue negotiations, its shareholders seem set to be the clear beneficiaries of this bidding war.
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