Major Spirit shareholder backs merger with JetBlue

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A major Spirit Airlines (S64) (SAVE) shareholder, the American hedge fund Discovery Capital Management, has urged the carrier’s Board of Directors to reject its possible merger with Frontier Airlines, arguing that the deal with JetBlue (JBLU) is “more favorable”. 

In an official letter sent to Spirit Airlines (S64) (SAVE) on July 12, 2022, Discovery Capital, which owns 1.4% of Spirit, implored the American low-cost carrier to abandon its merger with Frontier and to create the US’s fifth-largest air carrier by joining forces with JetBlue (JBLU).  

“We are writing you today as we are concerned about the upcoming vote on July 15th for the proposed merger with Frontier Airlines. […] Based on average daily trading volumes of SAVE [Spirit Airlines (S64) (SAVE), ed. note-] shares, we estimate that over 55% of the currently held SAVE common stock is likely unable to vote at the Special Meeting as it was acquired after May 6th,” the shareholder wrote. 

“This has created a worrisome situation whereby current SAVE shareholders are being disenfranchised of their full economic rights. This has become an even more stark issue as JetBlue (JBLU) has increased its competing bid for SAVE on multiple occasions,” Discovery added. 

The letter continued: “Yet, SAVE’s Board still refuses to recognize the superiority of the JetBlue (JBLU) bid and continues to recommend SAVE shareholders vote for the economically inferior Frontier Merger proposal. […] We urge you to change and update the record date to June 30th to allow current SAVE shareholders to vote at any Special Meeting for the Frontier Merger.” 

The shareholder’s letter was sent in response to Frontier Airlines’ request that Spirit Airlines (S64) (SAVE) delay a shareholder meeting regarding the proposed merger between the two companies to allow the airline more time to win approval from shareholders.  

Frontier sent a letter to Spirit’s management on July 10, 2022, requesting that the meeting be delayed until July 27, 2022. Frontier asked Spirit to respond to its latest offer proposal, which it said represented “Frontier’s last, best and final offer”. Frontier also said it would not be altering the terms of its proposal but noted that a rival bid from JetBlue (JBLU) seemed increasingly unlikely to win regulatory approval.   

The Spirit Airlines (S64) (SAVE) shareholder vote, which is now due to take place on July 15, 2022, has been rescheduled multiple times. Initially scheduled to take place on May 10, 2022, it was subsequently moved to June 10, June 30, and July 8 due to the ongoing bidding war over the ultra-low-cost carrier.  

The most recent decision to delay the meeting until July 15 was made by Spirit to allow for an extra week to continue discussions with the rival carriers.  

UPDATE 13-07-2022, 17:15 (UTC +3): Removes reference to ISS, which is not a shareholder

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