Midwest Airlines Victorious Over Airtran

[BallHawk]

AirTran Holdings Inc. has withdrawn from negotiations to buy Midwest Air Group Inc., and will not renew its tender offer -- signaling that Midwest Air has found a group of investors to help it fight off AirTran's hostile takeover attempt.

AirTran made that announcement at around 9 tonight. A separate announcement from Midwest Air, which operates Midwest Airlines and Midwest Connect, was expected to be issued later this evening.

AirTran proposed to buy Midwest Air for $15.75 a share, based on the closing price of AirTran stock on Friday. The offer consisted of $9.50 in cash -- up from $9 in cash -- and 0.5842 shares of AirTran common stock for each Midwest share. The total value of the purchase would have been more than $431 million.

"We are disappointed that the Midwest board has rejected our enhanced offer. We believe that a merger of AirTran and Midwest was a compelling strategic combination with similar fleets, complementary route networks, growth and advancement opportunities for employees and economic benefits to the communities we serve," said Joe Leonard, AirTran chairman and chief executive officer, in a statement. "For the good of our shareholders and crew members, we have terminated negotiations and allowed our tender offer to expire. At this time, we will focus our efforts on AirTran's strategic plan that has resulted in eight years of successful growth.

"The Midwest board has chosen to ignore the overwhelming majority of shareholders' wishes to merge with AirTran, a partner with whom Midwest could have grown and become a national carrier, including our commitment to provide employment protection and more jobs for its employees and more choices for its customers.

"Instead, the Midwest board has chosen a path that will benefit current senior management by selling out to a private equity firm and a so-called 'passive' investor whose involvement will surely raise antitrust concerns, casting doubt for shareholders on whether a transaction can, in fact, close. Furthermore, private equity investors are laser focused on generating short-term returns and the only way to accomplish that goal is to slash costs by cutting back on service and eliminating jobs. If the Midwest board is successful in selling the company to a private equity investor, the Midwest employees should be concerned about their job security and Midwest's customer service is sure to suffer," stated Leonard.

[the_idle_threat]

[the_idle_threat]

Awww, Joe Leonard sounds a little bitter.

Funny how the paper ran to him for quotes on this bit of news. He's taking parting shots like a spurned ex-lover.

[Patler]

I've heard a number of interviews with him since the initial offer. He often came across with an attitude of it being inevitable that the buyout would happen, and that Midwest could do nothing to stop it. His comments now are very unprofessional for the top executive of a major business. After all, this was business, nothing more. Trying to turn Midwest employees against their management by raising job security concerns is a pretty low blow in this situation.

They would have destroyed the character of Midwest Express, which makes it unique.

[hurleyfan]

Well I hope this is good news, I'm booked on Midwest for the Nov 18th game from Harford CT!

[BallHawk]

Well I hope this is good news, I'm booked on Midwest for the Nov 18th game from Harford CT!

Yup. You're still gonna get those warm chocolate-chip cookies.

[Little Whiskey]

I heard that northwest purch. midwest now. not sure this is any better

[Patler]

This is more of a privatization of Midwest than a sale to another operating entity. NW is just an investor, apparently about 20% worth. NW has already stated it will not be involved in operations, probably to soothe the antitrust concerns of the justice department. I wouldn't be surprised if the justice department denies this deal based on the market positions of MW and NW in Milwaukee. The 80% holder(s) might have to look for someone else to pick up the remaining 20%, or do it alone without NW.

[MateoInMex]

This makes me very very happy. I only use Midwest for domestic flights. I have flown pretty much every other domestic airline out there.

ATA SUCKS!!!!

America West isn't far behind either.


One of the strategies ATA was going to use once they would buy Midwest, is schedule the routes to fill up every seat. I am pretty sure that means they look at current routes for both airlines, figure out which ones have the least amount of passengers, combine them..more than likely using smalleraircraft to keep costs down

There would be more overbookings I'm sure. Right now, domestic air travel is at it's worst and passengers continue to be abused by airlines.

Midwest is still one of the "good guys" IMO. It would have been a nightmare to see ATA stamp it's approval of Dog Sh!t on everything Midwest.

Good thing it didn't happen.

[Merlin]

I wouldn't be too sure about the whole AirTran take over being a past deal. It looks like there may be a bidding war with the TPG group over who is going to pay the most.

[the_idle_threat]

Yeah, Joe Leonard just won't go away. Someone on the JSO comment board aptly compared him to the villain in the horror movie that comes back after you thought he was dead.

From what I understand, Airtran bought a ton of new planes with the anticipation that they would expand with the acquisition of Midwest. If they don't close the deal with Midwest, they're stuck with a bunch of planes and no viable expansion plan to make use of them.

From all appearances, the merger is just about do or die for Airtran. Given the alternatives, I hope it's the latter.

[MateoInMex]

This is very discouraging. Midwest and Northwest already claim 50% of the airline market in Milwaukee according to the JS Online

ATA claims that the merger would give jobs to Milwaukee and lower fares.

Midwest's fares are already low God Dammit!!!

ATA is a cheap airline for lack of a better word. They'll stuff the shi* outta flights and overbook the piss on routes screwing passengers even more.

[Partial]

You are not 13 or 14. You're 55. Minimum.

[BallHawk]

You are not 13 or 14. You're 55. Minimum.

Have you been talking with Retail lately?

[the_idle_threat]

TPG to acquire Midwest

Airline agrees to $17-a-share deal; AirTran accepts board's decision

By TOM DAYKIN
tdaykin@journalsentinel.com
Posted: Aug. 17, 2007

TPG Capital/Northwest Airlines Corp. won, AirTran Holdings Inc. lost and Midwest Airlines will keep its name, identity and independent status, after reaching a sale agreement with TPG Capital Thursday night.

TPG Capital, with financial backing from Northwest, will pay $17 a share for Midwest Air Group Inc., operator of Midwest Airlines, known for its baked-on-board chocolate chip cookies and wide seats, as well as regional carrier Midwest Connect.

The $450 million sale is subject to shareholder and regulatory approval, and is expected to be completed by the end of the year, Midwest Air Chairman and Chief Executive Officer Timothy Hoeksema said.

"The cookies stay," Hoeksema told reporters, who gathered at a hastily called late night news conference at the company's Oak Creek headquarters.

TPG Capital, an investment firm based in Fort Worth, Texas, raised its offer to $17 a share after rival AirTran this week submitted an offer of $16.25 a share. That AirTran offer, in turn, had trumped TPG Capital's $16-a-share offer that Midwest Air announced Sunday it would pursue.

That pursuit is now over, with the sale agreement signed, Hoeksema said. And while AirTran could still make another offer prior to the sale being finalized, the Orlando, Fla., airline indicated that wouldn't be happening.

"We accept the Midwest board's decision," AirTran Chairman and CEO Joe Leonard said.

"We sought to acquire Midwest because we believe joining the two airlines would have created a unique, efficient, truly national low-cost carrier with tremendous benefits for shareholders, communities and employees," Leonard said in a statement. "We hoped the Midwest board would come to share our vision and reach a consensual agreement - just as a majority of Midwest shareholders recognized the value in our strategic plan."

TPG Capital, along with sweetening its bid, had the advantage of presenting an all-cash offer, Hoeksema said.

Weighing pros and cons

AirTran's final offer, which amounted to $16.27 a share, was a mix of cash and stock. The offer also included conditions to limit the fluctuations in the AirTran offer that were tied to the daily changes in the closing price of AirTran stock, Hoeksema said. But, AirTran's offer price could still fluctuate over time depending on market conditions, he said.

Also, TPG Capital's offer did not come with a financing contingency, Hoeksema said. The AirTran offer had such a contingency, which was a concern, he said.

Hoeksema called the sale agreement to TPG/Northwest a "milestone" for Midwest Air, which was launched in 1984 and has built a reputation for offering a high level of customer service.

TPG Capital has endorsed Midwest Air's strategic plan, which focuses on what Hoeksema calls sustainable, steady growth - much of it through an expansion of Midwest Connect. Hoeksema's strategy also calls for replacing some two-across seats on Midwest Airlines with narrower seats to get more revenue from each flight.

TPG Capital, which has made investments in other airlines, is "very happy" with the quality of Midwest Airlines and Midwest Connect, the enthusiasm of the airlines' employees and the quality of the management team, Hoeksema said.

Hoeksema is expected to remain at the helm of Midwest Air. Under AirTran's ownership, he would have lost his job.

Thursday's announcement, which came after 11 p.m., capped a wild week in which first TPG Capital, and then AirTran, seemed to have the upper hand.

It began Sunday night, when Midwest Air's board voted to pursue a $16 a share offer from TPG Capital/Northwest. The board spurned AirTran's $15.75 offer, saying it preferred not only the higher amount bid by TPG Capital but also the "certainty" of an all cash offer.

But, less than 48 hours after it bitterly conceded defeat, AirTran revived and sweetened its offer. On Tuesday, after trading closed, AirTran announced it was offering $16.25 a share.

AirTran took that step after some institutional shareholders said they favored AirTran's bid. That campaign was led by Pequot Capital Management Inc., a Westport, Conn., hedge fund that is Midwest Air's largest shareholder, with an 8.8% stake.

Pequot said it believed AirTran's stock price would increase significantly if AirTran and Midwest reached a definitive sale agreement - providing more of an upside than the TPG Capital bid. Pequot also cited the tax advantages of receiving stock as part of the payment for Midwest Air.

AirTran's attempts

AirTran's renewed bid forced Midwest Air and TPG Capital to postpone their goal of reaching a definitive sale agreement by Wednesday. Midwest Air, apparently caught by surprise, issued terse statements saying the board would meet Thursday to consider the revised offer.

AirTran's offer appeared caught in a downdraft Wednesday when the company's stock price dropped. That caused the value of AirTran's cash and stock offer to post a value of $15.98 a share at the close of trading on Wednesday.

The wider volatility in the stock market continued on Thursday, with AirTran closing at $9.97, up 14 cents. That left AirTran's offer at $16.04 a share. Midwest Air stock closed unchanged at $14.70 a share.

Those fluctuations illustrated a point made by shareholders who favored TPG Capital's bid: the all-cash offer carries more stability.

Aside from money, board members had to consider two very different plans for Midwest Air's future.

AirTran said it would have greatly expanded Midwest Air, adding 74 daily departures from Mitchell International Airport and 29 destinations. The combined Midwest Airlines and Midwest Connect operations offer about 140 daily departures from Mitchell, to just more than 40 cities.

Another issue was the possibility of an antitrust challenge to TPG Capital's bid, because of Northwest's involvement. Midwest Air said Northwest would be a minority, passive investor, with no control over Midwest Air management. The two airlines would continue to compete, Midwest Air said.

But AirTran charged that Northwest, one of the country's largest airlines and the No. 2 carrier at Mitchell International, would use its position to reduce competition with Midwest Air. Midwest Air and Northwest together control about 69% of the market share at Mitchell.