Spirit Airlines rejected a $400 million merger proposal from Frontier this week, saying the offer was financially inadequate and came too late.
Spirit Airlines declined an opportunity to merge with rival low-cost airline Frontier on Wednesday.
Frontier had pitched the bankrupt airline on a coupledom that it claimed would have created a formidable low-cost competitor in the battle for passengers against American Airlines, Delta, Southwest, and United. While Spirit said a merger could create a “potent competitor in the marketplace” they’re just not that into it.
In an email, Spirit Chairman Mac Gardner and CEO Ted Christie told Frontier Chairman Bill Franke and CEO Barry Biffle no, thank you. “Unfortunately, despite the clear guidance we and others have provided for three weeks as to the Proposal’s many deficiencies, you have addressed virtually none of them,” Franke and Biffle wrote.
Spirit highlighted multiple issues with the merger proposal. It’s lower than terms previously hashed out in August 2024, which included $500 million in debt consideration and 26.5% ownership of the combined entity. The current proposal only offered $400 million in debt consideration and required $350 million in new funding from Spirit bondholders and they “emphatically reject” that.
Additionally, Spirit would have been on the hook for a $35 million court-approved break-up fee for terminating an existing equity rights offering. To boot, continuing forward would have delayed Spirit’s emergence from bankruptcy.
Therefore, Spirit Airlines, currently amid Chapter 11 bankruptcy, plans to stay its course, according to Securities and Exchange Commission filings.
“While we appreciate your continued interest and share your view of the logic of a potential transaction, your January 7 terms (which have not been improved on in the last three weeks) are both inadequate and unactionable,” Gardner and Christie told Franke and Biffle.
“As a result, time is of the essence.”
Spirit went on to call the deal, “woefully insufficient financially — particularly when compared to the economic agreement we reached last Summer and Fall from which Frontier unilaterally walked away.”
“Nor does it cover our funded debt or suffice to provide a recovery for equity,” Spirit added.
Last year, Frontier flirted with the idea of merging with Spirit, but was inevitably outbid by an $3.8 billion offer from JetBlue. The Justice Department sued to block the deal in place last year, noting it would raise prices for customers who rely on low fares.
The failed merger created a domino effect, sending Spirit to file for bankruptcy in November. Spirit is slated to rise from Chapter 11 bankruptcy in this quarter as a Feb. 13 court date to solidify its plan to eliminate debtor shareholders.
