JetBlue Airways Corp. improved its offer for Spirit Airlines Inc., boosting a breakup provision to US$350 million and adding an upfront cash payment days before shareholders will vote on a pending buyout agreement with Frontier Group Holdings Inc.

The revised offer increases JetBlue’s reverse breakup fee by US$150 million and provides for about US$164 million payable as a cash dividend “promptly following” a vote approving a combination of the carriers, the airline said in a statement Monday. That pushes the total value of the proposal to about US$3.4 billion.

Spirit said in a separate statement that its board would evaluate the updated terms with its financial and legal advisers.

The moves come after Frontier last week sweetened its own agreement by adding a key US$250 million fee payable to Spirit if their accord breaks up on antitrust grounds.

JetBlue is aiming to lure Spirit’s board into talks over the new proposal while also building more support among Spirit shareholders for its all-cash offer ahead of a June 10 ballot. It needs them to vote against Frontier’s stock-and-cash deal, initially valued at US$2.9 billion, to preserve its best chance for a quick infusion of growth that will help it compete against larger US carriers. Spirit rejected JetBlue’s initial US$3.6 billion offer, prompting a subsequent US$3.3 billion hostile tender bid.

Shares of Spirit increased 6.1 per cent to US$22 at 11:11 a.m. in New York trading. JetBlue rose two per cent and Frontier climbed 2.5 per cent.

Frontier didn’t respond to request for comment on the new offer.

Adding the upfront US$1.50-a-share payment from JetBlue addresses concerns that Spirit shareholders would have to wait through a lengthy regulatory review of the combination before receiving any cash.

‘MORE ATTRACTIVE’

The update makes the JetBlue bid “even more attractive than the transaction with Frontier because you get a special dividend that basically says, ‘we’re willing to put our money where our mouth is,’” during the antitrust review process, said Helane Becker, a Cowen analyst. “But the fact is that there’s no guarantee either deal gets done in the current administration.”

Spirit shareholders are faced with conflicting recommendations from prominent shareholder advisory firms. Institutional Shareholder Services Inc. found JetBlue’s offer superior from a financial standpoint and said that both bids have inherent risks when it comes to federal antitrust reviews. A rejection by Spirit investors would signal their board to restart talks with JetBlue, it said.

Proxy advisory firm Glass Lewis & Co. subsequently recommended Frontier’s proposal, calling it “the best available and most actionable” alternative.

Frontier is trying to preserve an agreement that would create the largest deep-discount airline in the US, with a clear path to pick up Spirit’s most price-sensitive customers and without a larger rival to hinder expansion. Such discounters charge bare-bones ticket prices and then levy fees for anything extra like bottles of water or paper boarding passes.