Frontier Airlines Buying Spirit In $2.9 Billion Deal
BOSTON (CBS/AP) - The parent company of the budget carrier Frontier is buying Spirit Airlines in a $2.9 billion cash-and-stock deal that will create the nation's fifth largest carrier.
The deal is valued at $6.6 billion when accounting for the assumption of debt and other liabilities.
The companies said Monday that the transaction will provide more low-cost fares for more travelers to destinations in the U.S., Latin America and the Caribbean. There's no word yet on a name for the merged airlines.
Both fly out of Logan Airport in Boston and serve some of the same routes, like Miami, Orlando, Puerto Rico and Cancun. They are also are among the lowest rated airlines when it comes to customer satisfaction.
Frontier Group Holdings Inc. and Spirit Airlines Inc. also anticipate $1 billion in annual consumer savings and are looking to expand their services with more than 350 aircraft on order.
The carriers may be in for a very close look by antimonopoly regulators. The Biden administration has signaled a tougher line against big corporate mergers. Yet airlines have suffered a devastating stretch during the pandemic despite assistance from the U.S., and are in a weakened position heading into 2022.
Existing Frontier shareholders will own approximately 51.5% and existing Spirit stockholders will own approximately 48.5% of the combined airline. The transaction is expected to close in the second half of the year.
Spirit shareholders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. This implies a value of $25.83 per Spirit share at Frontier's closing stock price of $12.39 on Friday.
Shares of Frontier, based in Denver, slipped almost 3% before the opening bell Monday. Shares of Spirit, based in Miami, jumped about 12%.
(© Copyright 2022 CBS Broadcasting Inc. All Rights Reserved. Associated Press Business Writer Michelle Chapman contributed to this report.)