08 Feb 2022

Frontier and Spirit tap Latham and Debevoise for $6.6bn budget carrier merger

Deal will create fifth-largest US airline and promises to 'further democratise air travel'

Washington, D.C.- July 15, 2021: Frontier Airlines Airbus A320neo landing at Ronald Reagan National Airport

Shutterstock; Andrew Mauro

Latham & Watkins and Debevoise & Plimpton are advising on Frontier Airlines’ acquisition of ultra-low cost carrier Spirit Airlines in a deal worth $6.6bn. 

The deal, expected to close in the second half of 2022, is projected to deliver a combined enterprise with annual revenues of around $5.3bn dollars based on 2021 results from the two companies. 

A team from Latham advised Colorado-based Frontier, while Debevoise advised Florida-based Spirit on the transaction, which will create the fifth-largest airline in the US behind American, Delta, Southwest and United, often referred to as the Big Four. 

Latham's corporate team is led by Bay Area partners Mark Bekheit and Tony Richmond, with financing matters overseen by Washington DC partner Ben Berman and compensation and tax issues handled by Bay Area partners Jay Metz and Kirt Switzer respectively.

The Debevoise team is being led by M&A partners Gregory Gooding and William Regner and includes finance partners Paul Brusiloff and Brian Liu, benefits partners Lawrence Cagney and Simone Hicks, tax partner Peter Furci and capital markets partners Eric Jurgens and Matthew Kaplan as well as six associates and four law clerks. Skadden Arps Meagher & Flom are also serving as legal counsel to Spirit's financial adviser Morgan Stanley in connection to the deal. 

Spirit and Frontier said they plan to bring more ultra-low fares to more travellers and destinations across the US, Latin America and the Caribbean, including both major cities and underserved communities. The merged company’s stronger financial profile will give it greater capacity to invest in innovation in order to compete ‘more aggressively’ with the Big Four, the two airlines said on Monday. 

It is believed the deal may run into regulatory issues in the face of the Biden administration’s crackdown on big ticket mergers, especially given the already tight conditions of the US aviation market. 

However, the companies said the combined entity would save consumers $1bn a year and provide more than 1,000 daily flights to more than 145 destinations in 19 countries and promised to add 10,000 direct jobs by 2026. 

In April last year, Latham advised Frontier on its $570m IPO, a deal on which Richmond also acted. A month later, Debevoise advised Spirit on a series of liability management capital markets transactions valued at more than $1bn that included a $371.3m common stock offering.

Meanwhile, Skadden Arps Meagher & Flom, Simpson Thacher & Bartlett and Weil Gotshal & Manges are advising on another recently-announced high-profile US merger, Microsoft’s landmark $68.7bn acquisition of Activision Blizzard.

 

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