The race to become the fifth-largest US airline is on its final stretch. The end of June is just a couple of days away, and Spirit Airlines is due to choose between its two suitors Frontier Airlines and JetBlue Airways. In a final attempt to knock Frontier out of the way, JetBlue has raised its offer yet again.

Frontier tried to take the lead

It was only a week ago that JetBlue made a fourth bid to acquire Spirit. This included the obligation to divest assets and an increase in the all-cash premium share price. JetBlue was confident that this would swing the votes of Spirit shareholders its way, especially with an added handsome reverse break-up fee.

Meanwhile, Chief Executive Officer of Frontier, Barry Biffle, has been making public statements about how a JetBlue merger would never be as beneficial and risk-free as the one his airline is offering. One significant risk is linked to the possibility of a block of a JetBlue-Spirit union from regulators. JetBlue would also enter monetary debt following a would-be successful merger. All in all, Spirit could stand to gain more financially in the long term if joining with its fellow ULCC.

The public comments came in a letter disclosed to Spirit shareholders on Friday, further detailing an improved offer from Frontier regarding a raised cash consideration, bringing the total to approximately $450 million. In addition to the added cash consideration, Spirit stockholders will also benefit from the pandemic recovery and share roughly $500 million in estimated annual net merger synergies. Frontier, it seemed, had no intention of backing down.

JetBlue dashes ahead

Meanwhile, determined to gain the upper hand, New York-based JetBlue has modified its proposal by adding a ticking fee. The ticking fee mechanism would provide Spirit shareholders with a monthly prepayment of $0.10 per share between January 2023 and the consummation or termination of the transaction. This represents an estimated aggregate ticking fee of up to $1.80 per share, of which the first $1.15 per share in payments will offset the reverse break-up fee or the merger consideration.

Any payments in excess of the $1.15 per share will be incremental to the total purchase price of $33.50 or the reverse break-up fee. This increases the total transaction consideration to up to $34.15 per share in the event the transaction is consummated and complete downside protection to $4.30 per share, or approximately $470 million in the aggregate, in the event the transaction is terminated. And speaking of the reverse break-up fee, JetBlue has yet again enhanced it to become $400 million payable to Spirit.

The hybrid carrier is going all-in with an enhanced accelerated prepayment of $2.50 per Spirit share, structured as a cash dividend to Spirit shareholders, should the vote be in favor of JetBlue. Regarding the revised offer, Hayes said:

"The entrenched Spirit Board has approved a revised deal that is ultimately better for Frontier and its controlling shareholder than it is for Spirit shareholders.”

Choosing between the low-cost carriers

For several months, this merger competition has seen plenty of bids, offers, and remarks from Frontier and JetBlue. As it will soon come to an end (dramatic or not), Spirit has both pros and cons to deal with on both fronts. Frontier has a stronger financial standing in the long run and the deal is less likely to be blocked. Meanwhile, JetBlue has the network (and the reputation). Then again, with a few days left, either party could still pull another last-minute attempt to sway Spirit either way. .