Frontier Airlines has agreed to buy Spirit Airlines for $3 billion

Frontier Airlines’ parent company is acquiring Spirit Airlines in a $2.9 billion cash-and-stock transaction that will create the nation’s fifth largest carrier.

When debt and other liabilities are factored in, the transaction is worth $6.6 billion.

According to the companies, the transaction will provide more low-cost fares for more travelers to destinations in the United States, Latin America, and the Caribbean. Frontier Group Holdings Inc. and Spirit Airlines Inc. both expect $1 billion in annual consumer savings and are planning to expand their services with more than 350 aircraft on order.

Antimonopoly regulators may be keeping a close eye on the carriers. The Biden administration has taken a tougher stance on large corporate mergers. Despite US assistance, airlines experienced a devastating stretch during the pandemic, leaving them in a vulnerable position heading into 2022.

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Existing Frontier shareholders will own approximately 51.5 percent of the combined airline, while existing Spirit stockholders will own approximately 48.5 percent. The deal is expected to be completed in the second half of the year.

Spirit shareholders will receive 1.9126 Frontier shares plus $2.13 in cash for each existing Spirit share. At Frontier’s closing stock price of $12.39 on Friday, this equates to a value of $25.83 per Spirit share.

Frontier, based in Denver, saw its stock drop nearly 3% before the market opened on Monday. Spirit, based in Miami, saw its stock rise by about 12%.

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