Frontier Group Holdings Inc. agreed to buy Spirit Airlines Inc. for US$2.9 billion in cash and stock, uniting two ultra-low-cost carriers targeting the recovering U.S. leisure-travel market. Spirit shares rose the most in 14 months.

Spirit investors will receive 1.9126 Frontier shares and US$2.13 in cash for each Spirit share, according to a statement Monday. The deal implies a value of US$25.83 a share for Spirit, a 19 per cent premium based on closing prices on Feb. 4.

The combination will bring Spirit back into the constellation of ultradiscounters led by William A. Franke, the managing partner of private equity firm Indigo Partners. Leisure travel has recovered more quickly from the slump caused by the coronavirus, and the ultra-low-cost carriers, with an unrelenting focus on fares and expenses, stand to grow quickly as travel normalizes.

Spirit, based in Miramar, Florida, and Denver-based Frontier share complementary cultures, fleets and geographical footprints, Spirit Chairman Mac Gardner said in the statement.

“This combination is all about growth, opportunities and creating value for everyone -- from our guests to our team members to the flying public at large,” he said. 

Spirit jumped 16 per cent to US$24.74 at 9:51 a.m. in New York after gaining 17 per cent, the most intraday since Nov. 9, 2020. Frontier rose 1.2 per cent to US$12.54.

Frontier holders will own 51.5 per cent of the combined company and name seven of the 12 directors, including Franke as chairman. Executive appointments will be decided later. 

Indigo Partners owns a majority stake in Frontier, and owns low-cost carriers including Hungary’s Wizz Air Holdings Plc, Chile’s JetSmart Airlines SpA and Mexico’s Volaris Aviation Holding. 

The four carriers placed a big bet on growth with a 255-plane combined order at the Dubai Air Show in November.