Frontier Group Holdings, Inc., parent company of Frontier Airlines, confirmed it made a compelling proposal to combine with Spirit Airlines through the issuance of newly issued Frontier debt and common stock.
The proposed transaction would provide meaningful value to Spirit financial stakeholders, in excess of Spirit’s standalone restructuring plan. As investors in the combined airline, Spirit’s financial stakeholders could participate in the upside of a stronger low-cost carrier while benefiting from the very significant synergies Frontier expects to achieve by combining the airlines’ operations.
Bill Franke, the Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners LLC, said, “This proposal reflects a compelling opportunity that will result in more value than Spirit’s standalone plan by creating a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale. We stand ready to continue discussions with Spirit and its financial stakeholders and believe that we can promptly reach agreement on a transaction. We are hopeful we can achieve a resolution that delivers significant value for consumers, team members, communities, partners, creditors and shareholders.”
“While we are pleased with the strong results Frontier has been able to deliver through the execution of our business strategy, we have long believed a combination with Spirit would allow us to unlock additional value creation opportunities,” said Barry Biffle, CEO of Frontier. “As a combined airline, we would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service.”
Since submitting the proposal, Frontier has held discussions with members of Spirit’s board of directors and management team, as well as representatives of Spirit’s financial stakeholders with respect to the proposal. As part of the discussions, Frontier shared materials with Spirit and its financial stakeholders regarding the benefits of the proposed transaction. The materials, which are based on Spirit’s bankruptcy court filings, also demonstrate that Spirit’s standalone plan will likely result in an unprofitable airline with a high debt load and limited likelihood of success.
The materials have been furnished on Form 8-K with the Securities and Exchange Commission.
Frontier delivered a letter outlining the terms of its proposal and Frontier’s willingness to continue to engage in negotiations to Spirit‘s Chair and Chief Executive Officer. The full text of the letter follows:
Dear Mr. Gardner and Mr. Christie:
As has been confirmed in our discussions with you and your advisors, both parties agree there is compelling industrial logic to the combination of our two companies. To that end, we have proposed to you a transaction, as previously communicated and as attached herein. We believe this transaction generates meaningful value for your stakeholders in excess of that generated by the plan you currently have on file with the Bankruptcy Court.
We put forward this offer in good faith, understanding that it generates more value for all Spirit stakeholders, including common stockholders. We have not, however, received a specific counterproposal but stand ready to negotiate any and all parts of this offer after receiving a substantive response from you.
We continue to believe that under the current standalone plan, Spirit will emerge highly levered, losing money at the operating level, and this would not be a transaction we would pursue. As a result, time is of the essence.
Sincerely,
Bill and Barry
