The Battle for Spirit: Merger Vote Postponed amid Talks

DALLAS - Spirit Airlines (NK) stated on Wednesday that a shareholder vote at a special meeting on a planned merger with Frontier Airlines (F9) will be postponed until July 8.

Spirit said in a late-Wednesday statement that the postponement would allow its board to "continue conversations" with both F9 and rival bidder JetBlue Airways (B6) and "continue to obtain proxies from its stockholders with respect to the Special Meeting."

And so, it seems it'll be next Wednesday when we finally see how the nation’s fifth-largest airline will be cobbled together. Will it be JetBlue (B6) acquiring Spirit (NK), or will the original suitor, Frontier (F9), take off hand-in-hand with the yellow discount carrier?

Both companies are making last-ditch pleas to NK shareholders to vote their way. On Monday, B6 upped its all-cash offer to top F9's enhanced bid that was put in place to make it competitive with the previous JetBlue offering (make sense?).

Hundreds of millions of dollars are at stake. And everyone is going all out to swing the vote their way. In fact, votespiritfrontier.com features a video in which Spirit CEO Ted Christie makes the case for the F9 bid. His pitch is that everyone wins with Spirit and Frontier.

Meanwhile, the investment firm TIG Advisors LLC, which owns about 2 million shares of NK, was all over Bloomberg yesterday saying that it planned to vote against the F9 bid. “We believe JetBlue’s acquisition proposal is the far superior outcome for Spirit and its shareholders, given its all-cash bid eliminates execution risk and maximizes certainty of value,” TIG wrote.

JetBlue has issued letters to Spirit shareholders touting its enhanced accelerated payment schedule, increased reverse termination fee, and ticking fee. You can read the letters at this link.

That Darn Alliance

Perhaps the biggest question mark on everyone’s mind – and possibly the determining factor in the ultimate outcome, is the Northeast Alliance that JetBlue has with American Airlines (AA).

The agreement that the Justice Department and Attorneys General of six states and the District of Columbia are suing to break up gives the two a near-monopoly on travel between the three major New York City airports and Boston Logan (BOS)—one of the most heavily traveled routes in the country.

JetBlue says it will divest assets in order to make the merger with Spirit work – but it won’t break up the Alliance. That alone could prevent federal approval of a JetBlue/Spirit tie-up and has likely turned many investors toward the Frontier offer.

It's also likely why B6 is offering a US$400m reverse breakup payment to NK investors if US regulators ultimately reject the deal.

The Owners

JetBlue CEO Robin Hayes in a statement said, "We complement the Spirit Board for listening to their shareholders, who clearly were not supportive of the Frontier transaction and adjourning the Special Meeting. We look forward to commencing a constructive and substantive dialogue with them."

So, who is voting? NK is owned by three major groups: individual stakeholders, mutual fund holders, and other institutional holders. A pair of graphics (above) on CNN Business shows the top owners of Spirit. The three groups are fairly evenly divided, so the two institutional investor groups hold the vast majority of shares – about 74% out of 108.62 million shares outstanding.

These people will determine the future of commercial aviation in the United States in a week's time. Maybe you are one of them. Perhaps you own shares through your 401K or have purchased shares on your own.

If so, and if you have a chance to vote. Vote wisely.

Featured image: N903NK, Spirit Airlines Airbus A320NEO. Photo: Michael Rodeback/Airways