M&A

Midwest Air Banks on Private Equity

TPG Capital beat out a bid from AirTran to acquire the airline.
Alan RappeportAugust 17, 2007

Midwest Air Group said Thursday it has agreed to be acquired by TPG Capital LP, a private-equity firm, in a $450 million deal. The merger will prevent the Wisconsin-based Midwest Airlines from joining forces with AirTran Holdings Inc., which bid $16.27 per share in cash and stock on Tuesday. TPG Capital, which includes Northwest Airlines, raised its bid to $17 per share in cash to secure the deal.

“We believe this outcome is a positive for our shareholders and is a positive for our loyal customers,” Timothy E. Hoeksema, chairman and CEO, said in a conference call Friday The merger turned in favor of TPG Capital in part because its offer had fewer conditions and was not financed by debt. “This creates the best value and greater certainty than the AirTran offer,” Samuel K. Skinner, chairman of the board’s special review committee on the merger, said in the conference call.

The level of Northwest’s investment has not been disclosed, but TPG partner Richard P. Schifter said if the firm were to cash out on the deal in the future, the Minnesota-based Northwest could potentially become the sole owner of Midwest. For now, he noted, “we hope that our industry experience, together with an expanded alliance with Northwest Airlines, will lead to a bigger and better Midwest.”

The failure to acquire Midwest comes as a blow to AirTran, which sought the company for more than two years after making an initial bid of $78 million in June 2005. “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,” says Joe Leonard, chairman and CEO of AirTran Airways. “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. However, we accept the Midwest board’s decision.”

The deal will need to be approved by Midwest shareholders, and is expected to be completed by the end of the year.

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