MIAMI (CBSMiami/AP) – South Florida-based Spirit Airlines is being bought by Frontier Airlines.
If the $2.9 billion cash-and-stock deal goes through, it will create the nation’s fifth largest carrier.
The tie-up is valued at $6.6 billion when accounting for the assumption of debt and other liabilities.
The companies said Monday that the transaction will provide more low-cost fares for more travelers to destinations in the U.S., Latin America and the Caribbean. Frontier Group Holdings Inc. and Spirit Airlines Inc. also anticipate $1 billion in annual consumer savings and are looking to expand their services with more than 350 aircraft on order.
In addition, Frontier and Spirit are looking to add more jobs. The companies foresee adding 10,000 direct jobs and thousands of additional jobs at their business partners by 2026.
“This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” Spirit CEO Ted Christie said in a prepared statement.
The carriers may be in for a very close look from antimonopoly regulators. The Biden administration has signaled a tougher line against big corporate mergers. Yet airlines have suffered a devastating stretch during the pandemic despite assistance from the U.S., and are in a weakened position heading into 2022.
Existing Frontier shareholders will own approximately 51.5% and existing Spirit stockholders will own approximately 48.5% of the combined airline. The transaction is expected to close in the second half of the year. It still needs approval from Spirit shareholders.
Spirit shareholders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on Friday.
The combined company is expected to have annual revenues of approximately $5.3 billion, based on last year’s results. Its board will include seven members named by Frontier and five members named by Spirit. Frontier Chair William Franke will serve as chairman of the combined company.
Shares of Frontier, based in Denver, slipped 2.2% before the opening bell Monday. Shares of Spirit, based in Miramar, jumped 12.5%.
(© Copyright 2022 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)