Spirit Airlines’ board of directors has been sued by a private shareholder, alleging that the Florida-based carrier furnished stockholders with deceptive and “materially incomplete” information in order to promote a proposed purchase and merger with Frontier Airlines.
Miriam Nathan’s complaint, which is being filed in federal court in New York, is one of several identical lawsuits filed by Spirit stockholders challenging the merger with Frontier.
Frontier and Spirit announced their desire to merge in February, with Frontier planning to buy Spirit and turn it into a wholly-owned subsidiary in a deal that would establish the United States’ fifth largest airline company.
JetBlue’s sudden decision to promote itself as a contender to become the new owner of Spirit, however, has thrown the arrangement into disarray.
The Spirit board has rejected JetBlue’s higher offer many times, claiming that the merger would be banned by competition regulators because to worries about JetBlue’s northeastern alliance with American Airlines.
The Spirit Airlines board “approved the filing of a materially deficient and deceptive” Proxy Statement with the federal Securities Exchange Commission, Nathan claims in her lawsuit.
The lawsuit filed on May 20 alleges that board members, including CEO Ted Christie, violated Sections 14(a) and 20(a) of the Exchange Act.
The lawsuit claims that Spirit submitted numerous financial estimates in its Proxy Statement to support the merger with Frontier, but failed to back up those projections with line item metrics to show how they arrived at their ultimate figure.
“Each of the defendants reviewed and authorized the dissemination of the Proxy Statement, which fails to provide critical information regarding, among other things, the financial projections of the company,” the lawsuit alleges.
Spirit shareholders should oppose the proposed merger with Frontier, according to JetBlue, since the Spirit board is driven by “severe conflicts of interest.”
Bill Franke, the chairman of Frontier, was previously the chairman of Spirit.
JetBlue has reminded shareholders that the Frontier merger offers “no regulatory commitments,” acknowledging that Spirit’s acquisition by JetBlue would spark a regulatory inquiry.