Proxy advisory firm Institutional Shareholder Services Inc has urged shareholders of Spirit Airlines to vote against a proposed merger with Frontier Group Holdings.
JetBlue Airways Inc's competing offer of $30 a share is superior from a financial standpoint, ISS said in a report on Tuesday, with a cash consideration at a meaningfully higher premium than the mostly stock deal from Frontier.
The value of Frontier's cash-and-stock offer for each share of the discount carrier stood at $22.31 on Tuesday.
"The (Spirit) board's view that a Frontier merger has a safer path to regulatory approval is not supported by any guarantee of value for shareholders in the event of regulatory rejection," the proxy advisory firm said in a report released on Tuesday.
Florida-based Spirit's chief executive, Ted Christie, said last week that it is unlikely shareholders would vote against its proposed merger with Frontier.
The advisory firm also said the board's decision to forgo an auction process is a cause for concern and shareholders may question the board's failure to negotiate a reverse termination fee with Frontier in light of the potential regulatory risk and JetBlue's offer of a $200 million termination fee.
In response, Spirit disagreed and added that "ISS appears overfocused on the absence of a reverse termination fee in that deal."
Meanwhile, JetBlue said the "report highlights the flawed process that the conflicted Spirit Board followed, which only underscores the need for Spirit's Board to now come to the table and negotiate."
Correction: This story has been updated to clarify that ISS urged Spirit shareholders to reject the Frontier offer, not that ISS urged Spirit shareholders to pick JetBlue offer over Frontier