If regulators block the Spirit merger, Frontier proposes a $250 million reverse breakup fee

June 6, 2022: -On Thursday, Frontier Airlines’ parent company said it is ready to pay a $250 million reverse breakup fee to Spirit Airlines if it does not get approved by the regulators on the decided combination of the two discount carriers for antitrust reasons, an effort directing at convincing investors to support the deal in the coming week as rival JetBlue Airways tries to purchase Spirit outright.

“The combination of a higher reverse termination fee and a much greater likelihood to close in a Frontier merger gives substantially more regulatory protection for Spirit stockholders than the transaction proposed by JetBlue,” Mac Gardner, Spirit’s chairman, said in a news release.

New York-based JetBlue offers $33 a share, or $3.6 billion cash for Spirit, more than the $2.9 billion cash-and-stock deal that Spirit and Frontier announced in February.

Spirit’s board rejected JetBlue’s advances, and JetBlue made a tender offer of $30 a share last month and has suggested Spirit shareholders vote against the deal.

Spirit said regulators wouldn’t probably approve a deal with JetBlue. JetBlue’s offer includes a $200 million reverse breakup fee if regulators don’t support the acquisition.

On Tuesday, proxy advisory firm Institutional Shareholder Services advised Spirit shareholders to vote against the Frontier deal, which raises concerns about the lack of a reverse termination fee.

“Spirit’s Board only went back to Frontier under pressure when it became clear their shareholders would reject the Spirit Board’s flawed process and Frontier’s inferior transaction,” JetBlue said in a statement Thursday.

“The addition of a reverse termination fee in the face of a likely defeat is simply an acknowledgment that both deals’ regulatory profiles and timelines are indeed similar,” it added.