Interest fee

Frontier offers $250 million break fee as part of Spirit Airlines deal

A logo of low-cost carrier Spirit Airlines is pictured on an Airbus plane in Colomiers near Toulouse, France, November 6, 2018. REUTERS/Regis Duvignau

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NEW YORK, June 2 (Reuters) – Frontier Group Holdings Inc (ULCC.O) said on Thursday it had agreed to pay a $250 million severance fee in a bid to save its acquisition of Spirit Airlines Inc (SAVE.N) which would create America’s fifth largest airline.

The loosening of the terms, first reported by Reuters, comes after proxy advisory firm Institutional Shareholder Services Inc (ISS) urged Spirit shareholders to vote against the Frontier deal because Spirit did not failed to negotiate severance pay if U.S. antitrust regulators shot down their deal. Read more

“Given our belief that regulators will find this combination pro-competitive, we have agreed to institute a reverse termination fee,” Frontier Chairman William Franke said.

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JetBlue Airways Corp (JBLU.O) is trying to force the deal with a hostile $3.3 billion bid for Spirit which the latter rejected, arguing regulators won’t give it the green light unless JetBlue does more concessions.

JetBlue, the sixth-largest US passenger carrier, made its offer directly to Spirit shareholders last month by launching a tender offer. Read more

“The addition of reverse termination fees (by Frontier) in the face of a likely defeat is simply an acknowledgment that the regulatory profiles and timelines of the two agreements are indeed similar,” JetBlue said in a statement Thursday.

Spirit shareholders are due to vote on the deal with Frontier on June 10. It’s unclear how Frontier’s break fee concession will change ISS’s recommendation. Read more

Frontier’s cash and stock offer valued Spirit at $25.83 per share when it was announced on Feb. 7. JetBlue’s tender offer is for $30 per share in cash, and the company said its previous rejected cash offer of $33 per share is still in effect. the table if Spirit decides to enter into negotiations.

JetBlue has also offered to pay Spirit a $200 million break fee if regulators block its proposed deal.

US airlines have been boosted by the return of travel in the wake of the COVID-19 pandemic and have managed to outrun soaring fuel and wage inflation by raising ticket prices. However, they may have to reduce capacity if the global economy slides into recession following interest rate hikes by central banks around the world to keep inflationary pressures in check. Read more

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Reporting by Greg Roumeliotis and Anirban Sen in New York; Additional reporting by Radhikaa Anilkumar; Editing by Chris Reese and Sherry Jacob-Phillips

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