The heat is on in the Spirit Airlines merger saga. Spirit last night shared details of an amended merger agreement with Frontier Airlines. Revisions include increased per-share cash consideration and a $350 million reverse termination fee. Overall, despite JetBlue's claims, Spirit's board determines that the New York-based airline's proposal is not superior to Frontier's.

Cash increase

In summary, Frontier will increase the cash part of the agreement by $2 per share to $4.13 per share, as well as 1.9126 Frontier shares in the cash-and-stock deal. The Colorado outfit will also prepay $2.22 per share as a cash dividend to Spirit shareholders after approval of the deal. The termination fee to Spirit has also been boosted by $100 million.

When it comes to combined directors, the number held by Frontier will rise by one and the number by Spirit will decrease by one. All in all, Spirit's board states that a merger with Frontier is "the most financially and strategically compelling path forward for Spirit stockholders and has a greater likelihood of closing."

Spirit's board has asked partakers in the Special Meeting of Stockholders on June 30th to approve the proposed Frontier merger. Every stockholder of record at the close of business on May 6th is entitled to vote on this day.

Spirit took time to emphasize that merging itself into JetBlue and its Northeast Alliance (NEA) with American Airlines will "exacerbate regulators’ valid concerns over airline industry concentration". However, it feels that the merger with Frontier would create a more effective ultra-low-cost-carrier challenger to industry powerhouses.

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JetBlue's response

Earlier this week, JetBlue increased its price offered for Spirit shares in its merger bid. It was the fourth offer from the carrier.

JetBlue has now reacted to the revised Frontier merger agreement. The company still believes that its own proposal is significantly greater than Frontier's deal, even after the revisions. It also highlights that it offers Spirit's shareholders better value and returns. In practice, The JetBlue offer would give £33.50 per share in cash, a 38% premium to the implied market value of Frontier's amendment. JetBlue expresses that the $2.00 per share offered by Frontier would be paid by Spirit shareholders via their ownership in the combined firm, giving way to just $1 of the incremental value.

Altogether, JetBlue will continue to campaign for Spirit shareholders to vote against the Frontier agreement. It said the following in a statement:

“The conflicted Spirit Board continues to rely on a series of mischaracterizations to justify an inferior deal – about the regulatory situation, that is at odds with the views of outside experts that our transaction can get done; about the Northeast Alliance, despite the overwhelming facts supporting its pro-competitive nature; and about the impact of the changing industry environment, including competition for pilots. Adding to these misrepresentations, the Spirit Board is now claiming they have served their shareholders by accepting a revised Frontier proposal, an act which does not change the fundamental superiority of our transaction, agreeing, among other things, in exchange for underwhelming financial concessions, to weaken Spirit shareholders’ governance in the combined company through less board representation.”

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Closing in

There have been several twists and turns in this tug of war. Earlier this month, the Institutional Shareholders Services (ISS), a proxy advisory company, urged Spirit Airlines’ shareholders to block the proposed merger with Frontier. Yet, just a few days later, Spirit’s management proudly shared that leading independent proxy advisory firm Glass Lewis recommended that the airline’s stockholders should vote for the proposal.

All eyes are on June 30th. Either way, there will be a merger that will affect United States' low-cost operations for years.

What are your thoughts about Spirit’s merger saga? Which way do you think the airline will go? Let us know what you think of the situation in the comment section.