A private shareholder has filed a lawsuit against the board of Spirit Airlines alleging the Florida-based carrier has provided stockholders with misleading and ‘materially incomplete’ information to support a proposed takeover and merger with Frontier Airlines.
The legal action which is being brought by Miriam Nathan in a New York federal court is one of several similar lawsuits which have been brought by Spirit shareholders challenging the merger with Frontier.
Spirit and Frontier announced their intention to merge in February, with Frontier set to acquire Spirit and make it into a wholly-owned subsidiary in a deal that would create the fifth largest airline group in the United States.
The deal has, however, been seriously disrupted by JetBlue’s surprise decision to present itself as a contender to become the new owner of Spirit.
JetBlue’s higher offer for Spirit has, though, been rejected several times by the Spirit board on the grounds that the acquisition would likely be blocked by competition regulators over concerns about JetBlue’s northeastern alliance with American Airlines.
Nathan alleges in her lawsuit that the Spirit Airlines board “authorized the filing of a materially incomplete and misleading” Proxy Statement with the federal Security Exchange Commission.
The May 20 lawsuit claims board members, including chief executive Ted Christie, violated Section 14(a) and 20(a) of the Exchange Act.
The basis of the lawsuit is that in its Proxy Statement, Spirit provided various financial projections to support the merger with Frontier but allegedly failed to back up those projections with line item metrics to prove how they got to their final 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.
JetBlue has urged Spirit shareholders to reject the proposed deal with Frontier on the grounds that the Spirit board is being driven by “serious conflicts of interest”.
The chairman of Frontier, Bill Franke, previously served as the chairman of Spirit.
Acknowledging that Spirit’s acquisition by JetBlue would trigger a regulatory review, JetBlue has warned shareholders that the Frontier deal offered “no regulatory commitments”.
