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Why Spirit Airlines (SAVE) Stock Fell in Yesterday's Trading

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Shares of Spirit Airlines SAVE dipped 1.97% on Jul 11, 2022, after Frontier Group Holdings ULCC declined to raise its offer price further for taking over SAVE. This means that ULCC will stick to its last month’s offer, whereby per-share cash consideration payable to Spirit Airlines’ shareholders will be $4.13. This is in addition to 1.9126 Frontier shares that ULCC had agreed to pay previously. ULCC will also prepay $2.22 per share to SAVE’s shareholders as a cash dividend upon the transaction’s approval.

The reverse termination fee is $350 million, payable to Spirit Airlines in case the deal fails to materialize due to antitrust concerns. Per ULCC’s CEO Barry Biffle, SAVE should consider last month's revised merger agreement as its "last, best and final offer."

Biffle also requested SAVE management to defer its shareholders’ vote on the buyout offer put forward by ULCC to Jul 27 from the currently scheduled date of Jul 15. He emphasized the need for more time to gather support. Notably, SAVE — currently carrying a Zacks Rank #4 (Sell) — already postponed its shareholders’ vote multiple times. The latest postponement came last week, when SAVE’s management rescheduled its shareholders’ vote on the buyout proposal submitted by Frontier Group Holdings from Jul 8 to Jul 15. The postponement came so as to enable Spirit continue talks with Frontier and another bidder JetBlue Airways JBLU.

Both JetBlue and Frontier aim to acquire Spirit Airlines to expand their network and capitalize on the continued improvement in air-travel demand. The takeover battle comes at a time when the airline industry is struggling with staffing and aircraft shortages.

Per JetBlue’s latest offer, it will prepay $2.50 per share as a cash dividend to Spirit Airlines’ shareholders soon after they vote in favor of the deal. This is higher than the prepayment of $1.50, as agreed upon previously. JBLU also increased the reverse break-up fee to $400 million from the previously proposed $350 million, payable to Spirit Airlines in case the deal fizzles out due to antitrust concerns. JBLU’s proposal also includes a ticking fee that will provide Spirit Airlines’ shareholders with a monthly prepayment of 10 cents per share between January 2023 and the closing or termination of the deal. This increases the transaction value to $34.15.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With Frontier refusing to sweeten the pot further and requesting SAVE to postpone its shareholders’ vote to persuade them to back the deal, a flurry of activities on this issue can be expected in the coming days. Stay tuned for more updates.

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Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Frontier Group Holdings, Inc. (ULCC) : Free Stock Analysis Report
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