Frontier Says It Lacks the Votes To Close Spirit Merger; Requests Fourth Vote Delay

Biffle wrote to Spirit's CEO Ted Christie and Thomas Canfield, general counsel and secretary, to inform them that Frontier was "very far from obtaining approval from Spirit stockholders based on the proxy data" it received last week. Moreover, Biffle asked that Spirit push its vote back to July 27 to give Frontier more time to build its case to Spirit shareholders.

"We stand ready to continue to speak with investors and advocate for our transaction," Biffle said. "We also believe that the proxy solicitation process would unquestionably benefit from the Board of Directors of Spirit expressly reaffirming its recommendation of the pending merger with Frontier, notwithstanding the Latest JetBlue Acquisition Proposal."

Lastly, he urged Spirit's Board to publicly support a merger with Frontier instead of JetBlue, and asked that they do it within 10 days, by July 20. With the increasing likelihood of the deal slipping from Frontier, now that Spirit's shareholders appear to be favoring JetBlue's offer, Biffle pressed Spirit’s Board members to be more transparent around their thought process regarding JetBlue.

"We believe that it is in the best interest of both you and our stockholders for Frontier to provide clarity on its response to the Latest JetBlue Acquisition Proposal," Biffle said. JetBlue's last offer stood at $3.7 billion cash, dwarfing Frontier's $2.6 billion cash and stock offer. Biffle said Frontier would not increase its offer, thus making this its "last, best and final offer."

JetBlue offers more cash up front, but there are regulatory hurdles it would need to overcome to consummate the deal. JetBlue and American Airlines (NASDAQ: AAL) are both heading to court in September to argue against a claim by the Department of Justice that their Northeastern Alliance is a “de facto merger” and is anti-competitive. Frontier has used the DOJ suit to make its case to Spirit shareholders that a JetBlue-Spirit deal would unwind—even with more cash upfront from JetBlue—ultimately creating no value.

Biffle said a Frontier-Spirit combination, which would create the fifth-largest airline in North America, would be "pro-competitive," ultimately offering more competitive routes and fares against the four majors. He underscored that point after the Department of Transportation recently awarded some in-demand Newark airport slots to Spirit over JetBlue and United. In that ruling, the agency said, "Spirit will best be able to provide competition consistent with the Department of Justice's (DOJ) original competition remedy."

What's not working in Frontier's favor is that Discovery Capital, an investment fund that owns 1.4 percent of Spirit's shares, issued a letter Tuesday urging Spirit's Board to vote against the Frontier merger. 

"[Spirit's] board still refuses to recognize the superiority of the JetBlue bid and recommends that [Spirit] shareholders vote for the economically inferior Frontier Merger proposal. Even ISS, the proxy advisory service, agreed as recently as June 28th that the JetBlue bid was 'more favorable' than the Frontier proposal. Yet, it was 'hesitant to change its earlier stand recommending [them] to vote for Frontier's offer,’" said Discovery Capital.

Neither Spirit nor JetBlue has commented on Frontier's most recent push to delay the vote—now set for Friday, if Spirit doesn’t decide to postpone it again. After Spirit delayed the vote last week, JetBlue's CEO Robin Hayes celebrated the development. 

"We are encouraged by our discussions with Spirit and are hopeful they now recognize that Spirit shareholders have indicated their clear, overwhelming preference for an agreement with JetBlue. We strongly recommend that Spirit shareholders continue to let the Spirit Board know they want to receive the superior value JetBlue has proposed by voting AGAINST the Frontier transaction," Hayes said.