Midwest board set to strike deal with TPG Capital, Northwest Airlines

Tuesday August 14, 2007
Midwest Air Group closed the door on an acquisition by eager AirTran Holdings, opting instead to pursue an unexpected all-cash deal offered by private equity investment firm TPG Capital, which is partnering with Midwest neighbor Northwest Airlines.
TPG Capital, which has been involved in recent bids for Qantas, Alitalia and Iberia, could finalize a "definitive" merger agreement with Midwest as early as Aug. 15, both TPG and Midwest said.
On July 31, Midwest announced it would open talks with AirTran but also said it would hold discussions with other groups that had expressed an interest in the company (ATWOnline, Aug. 1). AirTran had offered $15.75 per Midwest share, with a total equity value of cash and stock in excess of $431 million, the Atlanta-based carrier said.
On Sunday, Midwest board members unanimously approved the pursuit of TPG's offer of $16 cash per share. NWA released a statement saying that it would provide some financing but would not participate in management or control of Midwest. "The previously announced codeshare agreement between NWA and Midwest Airlines will remain in place and the two airlines will explore cost reduction activities such as joint fuel purchasing," it said.
"Our acquisition would provide for greater stability and prospects for all of the company's important constituencies," TPG Capital Partner Richard Schifter wrote in the proposal letter to Midwest. "We believe that our experience in this sector, together with our track record for maintaining stable, long-term investments, argue strongly in favor of an acquisition by TPG."
In announcing its decision to drop its bid, AirTran rebuked Midwest's decision, noting that the board was ignoring the "overwhelming majority" of shareholders' wishes. "Instead, the Midwest board has chosen a path that will benefit current senior management by selling to a private equity firm and a so-called 'passive investor' [NWA] whose involvement will surely raise antitrust concerns, causing doubt for shareholders on whether a transaction can, in fact, close," AirTran CEO Joe Leonard said.

by Sandra Arnoult