To put an end to the months-long war of bids between Frontier Group Holdings (ULCC) (OVN) and JetBlue Airways (JBLU) (DE:JAW) (GB:0JOT), the former declared that it would not further escalate its existing offer to acquire Spirit Airlines (SAVE) (S64) (OL8U).
Frontier urged Spirit to further postpone its shareholder vote from the scheduled July 15 to July 27. This will allow Frontier more time to convince Spirit shareholders and investors to favour its deal.
It is to be noted that if implemented, this will be the fourth time Spirit Airlines has postponed the shareholder vote.
Shares of both Spirit Airlines and JetBlue were down 2% during the trading hours, while Frontier shares closed flat but were down 2% during the extended trading hours.
The Tug-of-War for Spirit
In a letter addressed to the Spirit’s top management, Frontier CEO, Barry Biffle, stated that its revised merger offer made last month on June 24 should be considered as the Frontier’s “last, best and final offer with respect to the pending merger.”
Furthermore, Frontier also urged for clarity on Spirit’s response to JetBlue’s revised acquisition proposal.
An acquisition deal between Spirit and Frontier was made public in February 2022, and since then it has been a tug-of-war between JetBlue and Frontier. Both airlines relentlessly wooed Spirit with better offers, aspiring to become the fifth largest flying carriers in the U.S.
JetBlue’s all-cash offer now stands at $3.7 billion, while Frontier’s final cash-cum-shares offer implies a valuation of $2.7 billion. Notably, Frontier more than doubled the cash component of the deal by $2 per share, to $4.13 per share.
It is well-known that Spirit’s Board was in favor of Frontier over JetBlue, and they also encouraged their investors to approve the same. The Frontier deal potentially had a higher chance of getting approval from the regulators, as reasoned by the Spirit Board.
Meanwhile, investors resisted the Frontier merger and are more inclined towards the JetBlue deal.
Frontier CEO’s Letter to Spirit
In his letter to Spirit, CEO Barry Biffle said, “The value that your stockholders will potentially realize in a combination of our two airlines significantly exceeds the purported value contained in the latest proposal from JetBlue Airways Corporation. The proposal that JetBlue announced on June 27, 2022 is a proposal that we continue to believe is less attractive than the Frontier proposal.”
He further added, “However, should the Spirit Board of Directors conclude that it would instead desire to pursue an alternative transaction with JetBlue, we would appreciate being advised of that determination. Further, should this be the determination of the Spirit Board, we would be prepared to consider waiving our “match” right with respect to the latest JetBlue Acquisition Proposal under appropriate circumstances.”
Wall Street’s Take on Spirit
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on two Buys and three Holds. The average Spirit Airlines price target of $26 implies 6.51% upside potential to current levels.
Spirit’s Smart Score on TipRanks
SAVE scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Conclusion
Based on the proxy data as of July 8, Frontier believes that it “still remains very far from obtaining approval from Spirit stockholders.”
The shareholder vote is expected to be held this Friday. Considering the opposition from shareholders concerning the Frontier deal, Spirit may finally give in to JetBlue’s offer or maybe postpone the meeting one more time.
Investor’s may see the end of the bidding war soon.
