Frontier wants more time before the final bell rings.
The past few months have seen a whirlwind of activity as Frontier Group (ULCC) tries to complete a merger with fellow budget carrier Spirit Airlines (SAVE).
That tie-up appeared set to go before JetBlue (JBLU) decided to jump into the fray.
Late last month, JetBlue boosted its cash offer for Spirit to $33.50 per share, or $3.65 billion, while also boosting its 'reverse breakup fee' to around $350 million in the event that antitrust authorities fail to approve the merger.
Frontier has a $19.99 per share bid for Spirit that, while short of JetBlue's offer, carries fewer antitrust risks and is considered a "superior proposal' by the Spirit board of directors.
Last week, Spirit announced that it would again postpone a shareholder vote on a merger with Frontier Group to July 15. The company had initially scheduled the vote for June 10, before initially pushing it back to June 30 due to engagement with JetBlue.
Possibly sensing shareholder sentiment turning in favor of JetBlue, Frontier is now asking for more time to make its case.
Final Frontier for Frontier?
This could be the last stand for Frontier, which doesn't have the funds to compete directly with JetBlue's offer. Over the weekend Frontier sent a letter to Spirit asking the company to delay its shareholder vote to 11 AM ET July 27 as it needs more time to gather sufficient proxy support.
Frontier's pitch is that the long-term value to Spirit shareholders is greater with a Frontier tie up than it would be with JetBlue.
"I would like to reiterate our continued belief that the pending combination of Frontier with Spirit Airlines, Inc. (“Spirit”) presents a unique opportunity for both companies’ stockholders to realize meaningful long-term value," the letter addressed to Spirit President/CEO Ted Christie and Senior VP Thom Canfield.
Frontier called its proposed merger with Spirit "pro-competitive" while saying that the "path to regulatory approval of a JetBlue-Spirit combination seems more impossible by the day."
Frontier argues that JetBlue's high cash offer "creates a hard cap on value," meanwhile the total cash consideration for Frontier's offer is about $450 million with another $500 million in estimated annual net merger synergies.
Frontier says a tie up between the two companies could "easily provide pro forma value in excess of $50 (per share) as evidenced in Spirit's own investor materials.
Frontier said that it does not intend to modify the financial terms of its last offer.
"As has been the case throughout this process, we remain committed to this transaction. 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," Frontier said.
Spirit shares were falling 1.6% to $24.50 at last check Monday morning.
Industry Dynamic Complicate Matters
Spirit's takeover by either Frontier or JetBlue would likely face significant regulatory hurdles and a close look from the Department of Justice on fears that it could raise fares and limit customer choice.
In late March, a group of lawmakers lead by Senators Elizabeth Warren and Bernie Sanders told regulators the deal would "consolidate market power for the airlines and reduce choices for travelers."
This comes at a time when airlines are cancelling thousands of flights every weekend during the busy summer travel season for a myriad of reasons.
It has been a bumpy ride for airlines as the industry attempts to get back into a pre-pandemic swing following more than two years of decreased travel.
