The parent company of the budget carrier Frontier is buying Spirit Airlines in a $2.9 billion cash-and-stock deal that will create the nation's fifth largest carrier.
The deal 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.
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The carriers may be in for a very close look by 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.
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.
Shares of Frontier, based in Denver, slipped almost 3% before the opening bell Monday. Shares of Spirit, based in Miami, jumped about 12%.
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