Frontier and Spirit shares fall ahead of key merger vote

Shares of Frontier Airlines and Spirit Airlines fell on Monday after their improved merger proposal won key approval days before a crucial shareholder vote.

Frontier CEO Barry Biffle said Monday he was optimistic. Spirit shareholders will approve Frontier’s latest stock and cash offer for Spirit when they vote on Thursday.

“I think we have a lot of momentum, so we feel really good,” Biffle said in an interview.

Frontier is trying to fend off an attempt by JetBlue Airways to rush in and seize Spirit with a cash offer worth around $3.6 billion.

Late Monday, JetBlue raised to $400 million the break fee it would pay Spirit if antitrust regulators blocked it from buying the airline at a discount. JetBlue also increased to $2.50 per share a cash dividend that Spirit shareholders would receive if they approved a sale to JetBlue.

Over the weekend, proxy advisory firm Institutional Shareholder Services reversed itself and recommended that Spirit shareholders approve the deal in their vote on Thursday. ISS initially opposed the proposal bolstering JetBlue’s effort.

Shares of Frontier closed Monday down more than 11% and Spirit fell around 8%. JetBlue rose less than 2%.

Frontier’s offer was valued at $2.9 billion when it was announced in February, but fell in value due to a drop in Frontier’s share price. Frontier added $2 per share in cash and a larger reverse break fee to its offer Friday night, prompting the new valuation by ISS.

Denver-based Frontier and Spirit, based in Miramar, Fla., say antitrust regulators won’t let New York-based JetBlue buy Spirit. JetBlue disputes this claim and accuses the other party of inflating the projected value of a Frontier-Spirit combination.