NEW YORK (AP) — A company that advises investors on proxy voting said Tuesday that Spirit Airlines shareholders should oppose Frontier Airlines’ bid to buy Spirit, saying a competing offer from JetBlue is better.
Institutional Shareholder Services Inc. conceded that Spirit’s board may be correct in concluding that Frontier’s offer has a better chance of winning approval from antitrust regulators. However, the company said, both offers carry regulatory risks, but only JetBlue’s offer includes a $200 million break fee in case regulators reject it.
ISS said Spirit shareholders should reject Frontier’s offer to signal its board to pursue negotiations with JetBlue, possibly for a larger severance package.
Shareholders of Miramar, Fla.-based Spirit are due to vote June 10 on approving Frontier’s stock and cash offer, which was valued at $25.83 per share or $2.8 billion. when it was announced in February. The offer value has fallen 26% to $19.19 per share since then due to a drop in the value of Frontier shares, ISS said.
JetBlue made an all-cash offer of $33 per share, or $3.6 billion, in April, and when that was rejected, it launched a tender offer at $30 per share, or $3.2 billion.
While New York-based JetBlue wants to acquire 100% of Spirit, Frontier’s offer would allow Spirit shareholders to retain 48.5% of the new combined airline.
The Spirit board’s view “that more patient shareholders would reap greater benefits by remaining invested in a combined Frontier/Spirit may prove over time,” ISS acknowledged. But he said a sale to JetBlue would give Spirit shareholders a significant premium as airline stocks slump and leave those optimistic about the sector to reinvest the premium.
In afternoon trading, shares of Spirit Airlines Inc. and Denver-based Frontier Group Holdings Inc. gained 2%, while JetBlue Airways Corp. remained virtually unchanged.
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