Frontier Airline’s parent company confirmed plans to pay a $250 million reverse breakup fee to Spirit Airlines to keep regulators from approving the planned merger between the airline and JetBlue Airways, CNBC reported.
“The combination of a higher reverse termination fee and a much greater likelihood to close in a Frontier merger provides substantially more regulatory protection for Spirit stockholders than the transaction proposed by JetBlue,” Mac Gardner, Spirit’s chairman, said, according to CNBC.
The planned merger of the two discount carriers for antitrust reasons serves as an initiative aimed at convincing investors to approve the terms of its rival’s proposal this week.
In February, JetBlue offered $33 a share, or $3.6 billion cash for Spirit. The New York-based airline’s proposal exceeded that of Frontier’s, which is valued at $2.9 billion. The company's offering came after Spirit’s board rejected its offering.
“The addition of a reverse termination fee in the face of a likely defeat is simply an acknowledgement that the regulatory profiles and timelines of both deals are indeed similar,” the airline commented.
Spirit’s upcoming shareholding meeting was scheduled for June 10. The company projects that regulators will likely disapprove of a deal with JetBlue.
JetBlue said in a statement that the Spirit board “only went back to Frontier under pressure, when it became increasingly clear their shareholders would decisively reject the Spirit Board’s flawed process and Frontier’s inferior transaction.”
While Proxy advisory firm Institutional Shareholder Services had advised Spirit shareholders to vote against the Frontier deal, raising concerns about the lack of a reverse termination fee, a separate proxy advisory firm, Glass Lewis, suggested shareholders approve Frontier’s offer, highlighting the potential benefits of the “last-minute inclusion,” which include minimizing the concerns related to a potential deal blockage on behalf of regulators, according to CNBC.