U.S. low-cost carriers Spirit Airlines (SAVE) and Frontier Group Holdings (ULCC) announced a merger agreement that values Spirit at $2.9 billion U.S.
The transaction value of the deal is $6.6 billion U.S. when accounting for the assumption of net debt and operating lease liabilities, the companies said in a written statement.
The merger of the two largest low-cost carriers in the U.S. will create the fifth largest airline in America. The boards of both companies approved the deal over the weekend.
The deal is structured with Frontier Airlines controlling 51.5% of the merged airline while Spirit will hold the remaining 48.5%. Spirit investors will receive 1.9126 shares of Frontier plus $2.13 U.S. in cash for each Spirit share they own.
The companies say the deal implies a value of $25.83 U.S. per Spirit share, which would be a 19% premium over the value of Spirit shares at the end of last week.
Still to be determined is the name of the combined carrier, who will be CEO, and the location of the airline’s headquarters. The chair of the new airline will be Bill Franke who is the current chair of Frontier and managing partner of its parent company Indigo Partners.
In a news release announcing the agreement, Franke said the combined carrier “will create America’s most competitive ultra-low fare airline for the benefit of consumers.”
