September 29, 2022
JetBlue And Frontier Boost 'Wedding Insurance' Ahead Of Spirit Shareholder Vote

There’s less than a week to go before Spirit Airlines stockholders vote on whether to accept a takeover bid from fellow low-cost carrier Frontier Airlines or to reject it and open the door to a more lucrative, hostile bid from JetBlue Airways.

Frontier has claimed the merger of two “complementary businesses” would “create America’s most competitive ultra-low fare airline for the benefit of consumers.” JetBlue, meanwhile, has argued that acquiring Spirit would allow it to compete with the so-called “Big Four” U.S. carriers – American, Delta, United, Southwest — that together control nearly 80% of the market.

Ahead of the June 10 vote, there’s some evidence that some Spirit investors were getting cold feet about the Frontier deal. While Frontier and JetBlue have gone tit-for-tat over recent weeks, progressively upping the ante in their appeals to Spirit investors, the latest round of offers is all about breakup fees.

Think of these fees as the mergers-and-acquisitions equivalent of wedding insurance, says antitrust expert Florian Ederer, associate professor of economics at the Yale School of Management. “If the shareholders vote in favor of a deal, and then later the deal does not go through because of antitrust scrutiny, the shareholders are compensated,” he says, similarly to how the bride’s family might be covered by wedding insurance if one of the lovebirds had a change of heart.

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