The parent company of the budget carrier Frontier is buying Spirit Airlines in a $2.9 billion cash-and-stock deal that will create the nation’s fifth-largest carrier.
The deal is valued at $6.6 billion when accounting for the assumption of debt and other liabilities.
Spirit shareholders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on Friday.
The companies said Monday that the transaction will provide more low-cost fares for more travelers to destinations in the U.S., Latin America and the Caribbean. Frontier Group Holdings Inc. and Spirit Airlines Inc. also anticipate $1 billion in annual consumer savings and are looking to expand their services with more than 350 aircraft on order.
Existing Frontier shareholders will own approximately 51.5% and existing Spirit stockholders will own approximately 48.5% of the combined airline. The transaction is expected to close in the second half of the year.
Shares of Frontier, based in Denver, slipped almost 3% before the opening bell Monday. Shares of Spirit, based in Miami, jumped about 12%.