A proxy advisory firm is urging Spirit Airlines shareholders to vote against the company's proposed merger with Frontier Airlines.
Institutional Shareholder Services wrote a report stating that the competing purchase offer from JetBlue would provide a better financial deal to Spirit shareholders.
"On balance, a potential agreement with JetBlue would appear to offer shareholders superior optionality, allowing those concerned with the turbulence ahead to exit at a significant premium, while allowing those with a more optimistic outlook to reinvest the premium consideration," ISS said.
JetBlue quoted excerpts from the report in a press release on Tuesday. ISS declined to provide the full report to Travel Weekly.
JetBlue CEO Robin Hayes also released a statement Tuesday, saying the report highlights what he called "the flawed process" followed by the Spirit board in recommending the Frontier proposal above the JetBlue purchase offer.
JetBlue is offering $30 per share to Spirit investors, while Frontier's offer would provide Spirit investors with 1.9126 shares of Frontier stock, plus $2.13 for each of their Spirit shares. Frontier stock was trading at around $10.60 early Tuesday afternoon, making the value of Frontier's offer $22.40 per share.
Spirit's board and management have rejected JetBlue's bid, saying such a merger between the two airlines would have little chance of being approved by antitrust regulators at the Justice Department. The DOJ is already suing to breakup JetBlue's and American's Northeast Alliance.
And, Spirit CEO Ted Christie argues that regulators will look askance on the merger of ultralow-cost carrier Spirit with a higher-cost airline like JetBlue.
ISS, however, noted in its report that JetBlue has offered a $200 million termination fee to Spirit in light of the risk of regulatory rejection, and the Spirit board has negotiated no such fee with Frontier.
"Spirit's view that the Frontier proposal may have a smoother glide path towards achieving regulatory approval appears reasonable, but its assertion that the JetBlue proposal has zero chance of approval appears far less so," the proxy advisory firm said.
Spirit did not immediately comment on the report.
On June 10, Spirit shareholders will vote on the proposed merger with Frontier.