Spirit Airlines has declined Frontier Group’s latest acquisition offer, stating that the proposal does not provide sufficient value for its shareholders. The offer, worth approximately $2.16 billion, was a revised version of Frontier’s earlier bid. Spirit has been undergoing financial restructuring after filing for bankruptcy protection last year and remains committed to completing this process independently. The airline’s decision reflects its belief that its ongoing reorganization plan is more beneficial than the terms offered by Frontier.
Spirit and Frontier have engaged in merger discussions for years, including a previously proposed deal in 2022. However, that attempt was derailed when JetBlue Airways made a competing bid and ultimately won the merger battle. The JetBlue-Spirit merger was later blocked by a U.S. judge over concerns about reduced competition in the airline industry. Following this, Frontier revived its interest in acquiring Spirit, but the airline remained cautious about entering into another deal that might not be completed.
Why Did Spirit Reject Frontier’s Offer?
Spirit determined that the revised proposal did not address key concerns related to financial risks and deal certainty. The revised offer included $400 million in debt and a 19% stake in Frontier but removed a previous condition requiring Spirit to conduct a $350 million equity rights offering. Additionally, it required the waiver of a bankruptcy court-approved $35 million termination fee. Despite these adjustments, Spirit concluded that the offer did not deliver the level of security and shareholder advantage it sought.
How Did Frontier Respond?
Frontier rejected Spirit’s counterproposal, which suggested a deal structured with $600 million in debt and $1.185 billion in equity. Spirit had hoped this alternative approach would be more favorable for its stakeholders, but Frontier did not accept the revised terms. Spirit emphasized that its restructuring efforts were progressing as planned and did not require a merger with Frontier to succeed.
Spirit has remained firm in its position that its standalone restructuring is the preferable course of action. The airline expects to complete this process in the first quarter of the year. While a merger could provide financial support, Spirit believes its current strategy serves its shareholders’ best interests. The company has expressed concerns that Frontier’s proposal does not sufficiently mitigate potential risks related to regulatory approval and financial stability.
Industry analysts have noted that Spirit’s rejection of Frontier’s offer aligns with broader trends in airline consolidation discussions. Mergers in the airline industry frequently face regulatory scrutiny, as demonstrated by the blocked JetBlue-Spirit deal. Spirit’s decision also highlights the challenges ultra-low-cost carriers face in securing long-term financial stability while balancing shareholder interests.
Spirit Airlines’ rejection of Frontier’s proposal underscores the complexities of airline mergers, particularly in a challenging financial environment. The airline’s decision to focus on its restructuring plan rather than pursuing a merger suggests confidence in its long-term viability. Regulatory concerns, financial risks, and shareholder priorities continue to shape discussions in the airline industry, making future merger attempts uncertain. Investors and industry observers will closely watch whether Frontier makes another bid or if Spirit pursues alternative strategies to strengthen its position.
