Spirit Airlines surged 13% in premarket trading. Spirit Airlines, Frontier to merger in a deal valued at $6.6 bln.
Under the terms of the deal, Spirit equity holders will receive 1.9126 shares of Frontier (ULCC) plus $2.13 in cash for each existing Spirit share they own, according to a statement. The transaction represents a 19% premium to Spirit's closing price on Friday. Including debt, the deal is valued at $6.6B.
The deal is expected to close in the second half of 2022. Frontier and Spirit expect to deliver annual run-rate operating synergies of $500M.
On a combined basis, the new company would have annual revenues of approximately $5.3B based on 2021 results. The combined airline is expected a cash balance of approximately $2.4B as of the end of 2021 on a combined basis.
Upon closing of the deal, existing Frontier (ULCC) holders will own about 51.5% and existing Spirit (SAVE) holders will own approximately 48.5% of the combined airline.
Citigroup is serving as financial advisor and Latham & Watkin is serving as legal advisor to Frontier (ULCC). Barclays and Morgan Stanley are serving as financial advisors and Debevoise & Plimpton LLP is serving as legal advisor to Spirit (SAVE).
Earlier, Spirit Airlines Non-GAAP EPS of -$0.64 beats by $0.23, revenue of $987.6M beats by $24.47M.
Spirit Airlines reported quarterly losses of $(0.64) per share which beat the analyst consensus estimate of $(0.88) by 27.27 percent. This is a 60.25 percent increase over losses of $(1.61) per share from the same period last year. The company reported quarterly sales of $987.60 million which beat the analyst consensus estimate of $963.15 million by 2.54 percent. This is a 98.12 percent increase over sales of $498.49 million the same period last year.
"Our fourth quarter 2021 results came in better-than-expected, despite the negative impact from Omicron-related flight disruptions, primarily due to very strong demand over the peak December holiday period. I want to thank the entire Spirit team for their professionalism and commitment to providing excellent service to our Guests," said Ted Christie, Spirit's President and Chief Executive Officer.
"Looking ahead to the first quarter 2022, we have seen sequential improvement in bookings since mid-January and early trends indicate travel demand in the second half of the first quarter should be quite strong. Also, today we announced that Spirit and Frontier have signed a definitive merger agreement under which we plan to combine to bring more ultra-low fares to more travelers in more destinations across the United States, Latin America and the Caribbean. We are excited about this combination and believe it will have tremendous benefits for consumers, Team Members, and shareholders."
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