Max Powers
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TPG's Midwest Bid Could Lead
To Carrier's Sale to Northwest
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By SUSAN CAREY
August 17, 2007 4:01 p.m.[/FONT]
[/FONT]
Private-equity firm TPG Capital said its proposed $450 million acquisition of Midwest Air Group Inc. leaves open the possibility of an eventual sale of the small airline to Northwest Airlines Corp., TPG's passive, minority partner in the deal, according to Rick Schifter, a TPG partner.
Mr. Schifter, speaking on a conference call today to discuss the merger agreement reached last night, said TPG sees various means to cash out of Midwest, including a sale to the public and a sale to Northwest. He said those outcomes probably will occur "several years out" but could happen sooner. He declined to disclose the size of Northwest's stake in the proposed deal, which must navigate antitrust and Midwest shareholder approval.
Northwest in recent days also has declined to say how large its stake would be and today continued to avoid disclosing the figure. A spokesman for the Eagan, Minn., company, the nation's fifth-largest airline by traffic, also said he couldn't comment on Mr. Schifter's remarks. Midwest officials also declined to say how big Northwest's stake would be.
As reported, Midwest's board unanimously agreed last night to a sweetened, $17 a share, all-cash offer from TPG and Northwest, spurning a cash-and-stock bid valued at $16.27 a share from AirTran Holdings Inc. AirTran, the Orlando, Fla., parent of discount carrier AirTran Airways, has been pursuing Midwest for months and improved its offer earlier this week after the Midwest board on Sunday settled on an TPG-Northwest bid of $16 a share.
Tim Hoeksema, Midwest's chairman, president and chief executive officer, said today that TPG and AirTran were asked yesterday to submit a "best and final" offer. It was then that TPG and Northwest raised their bid by $1 a share, again without financing contingencies. AirTran's offer, $10 a share in cash and a fraction of AirTran stock worth $6.27, had numerous contingencies, including AirTran's ability to obtain at least $150 million in debt financing and possible approval by AirTran holders. And depending on fluctuations in AirTran's stock, the purchase price for Midwest could have varied greatly.
Joe Leonard, chairman and chief executive of AirTran, said in a statement that his company accepts the Midwest board's decision and ended its efforts to buy Midwest. During the months-long pursuit, an AirTran tender offer received support from 63% of Midwest's holders, and AirTran managed to get three of its representatives onto Midwest's nine-member board. Mr. Leonard noted that "AirTran doesn't need to merge with any other carrier to achieve our business goals" but sought to acquire the company "because a merger made strategic and operational sense."
Northwest's interest was to keep AirTran, a nimble, fast-growing, low-cost airline, from taking root in Milwaukee, Midwest's home base. Northwest has many frequent fliers in Milwaukee, serves numerous cities in Wisconsin and has a big presence in the Upper Midwest. As the AirTran pursuit dragged on and Midwest was trying to improve its standing as an independent airline, Northwest and Midwest announced plans to begin a code-sharing marketing relationship, which is slated to begin next month.
To safeguard that deal and a year-old reciprocal frequent-flier relationship with Midwest, Northwest threw its lot in with TPG, one of two potential financial investors that did due diligence one Midwest board finally opened the company to possible suitors. TPG has a long history of investments in the airline industry and has ended most of them by selling its stakes to the public.
TPG's Mr. Schifter said today that his firm fully endorses Midwest's plans to increase its capacity and enter the marketing arrangement with Northwest. "We're anticipating a return on our capital," he said. "Management's plan will drive a significant increase in profitability."
Mr. Hoeksema, Midwest's CEO, said his board is confident antitrust approval for the deal will be obtained, leading to the transaction closing in the fourth quarter. "There is strong [airline] competition in Milwaukee and no barrier to entry," he said. While Northwest and Midwest have 68% of the seats departing from that city, they only overlap on one nonstop flight. A combination of Midwest and AirTran would have controlled 64% of the seats and had seven overlapping nonstop flights, he said.
In American Stock Exchange trading this afternoon, Midwest shares rose 83 cents to $15.53. Northwest stock, traded on the New York Stock Exchange, gained 11 cents to $16.09. AirTran shares also traded on the Big Board, were up 27 cents to $10.24.
To Carrier's Sale to Northwest
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By SUSAN CAREY
August 17, 2007 4:01 p.m.[/FONT]
[/FONT]
Private-equity firm TPG Capital said its proposed $450 million acquisition of Midwest Air Group Inc. leaves open the possibility of an eventual sale of the small airline to Northwest Airlines Corp., TPG's passive, minority partner in the deal, according to Rick Schifter, a TPG partner.
Mr. Schifter, speaking on a conference call today to discuss the merger agreement reached last night, said TPG sees various means to cash out of Midwest, including a sale to the public and a sale to Northwest. He said those outcomes probably will occur "several years out" but could happen sooner. He declined to disclose the size of Northwest's stake in the proposed deal, which must navigate antitrust and Midwest shareholder approval.
Northwest in recent days also has declined to say how large its stake would be and today continued to avoid disclosing the figure. A spokesman for the Eagan, Minn., company, the nation's fifth-largest airline by traffic, also said he couldn't comment on Mr. Schifter's remarks. Midwest officials also declined to say how big Northwest's stake would be.
As reported, Midwest's board unanimously agreed last night to a sweetened, $17 a share, all-cash offer from TPG and Northwest, spurning a cash-and-stock bid valued at $16.27 a share from AirTran Holdings Inc. AirTran, the Orlando, Fla., parent of discount carrier AirTran Airways, has been pursuing Midwest for months and improved its offer earlier this week after the Midwest board on Sunday settled on an TPG-Northwest bid of $16 a share.
Tim Hoeksema, Midwest's chairman, president and chief executive officer, said today that TPG and AirTran were asked yesterday to submit a "best and final" offer. It was then that TPG and Northwest raised their bid by $1 a share, again without financing contingencies. AirTran's offer, $10 a share in cash and a fraction of AirTran stock worth $6.27, had numerous contingencies, including AirTran's ability to obtain at least $150 million in debt financing and possible approval by AirTran holders. And depending on fluctuations in AirTran's stock, the purchase price for Midwest could have varied greatly.
Joe Leonard, chairman and chief executive of AirTran, said in a statement that his company accepts the Midwest board's decision and ended its efforts to buy Midwest. During the months-long pursuit, an AirTran tender offer received support from 63% of Midwest's holders, and AirTran managed to get three of its representatives onto Midwest's nine-member board. Mr. Leonard noted that "AirTran doesn't need to merge with any other carrier to achieve our business goals" but sought to acquire the company "because a merger made strategic and operational sense."
Northwest's interest was to keep AirTran, a nimble, fast-growing, low-cost airline, from taking root in Milwaukee, Midwest's home base. Northwest has many frequent fliers in Milwaukee, serves numerous cities in Wisconsin and has a big presence in the Upper Midwest. As the AirTran pursuit dragged on and Midwest was trying to improve its standing as an independent airline, Northwest and Midwest announced plans to begin a code-sharing marketing relationship, which is slated to begin next month.
To safeguard that deal and a year-old reciprocal frequent-flier relationship with Midwest, Northwest threw its lot in with TPG, one of two potential financial investors that did due diligence one Midwest board finally opened the company to possible suitors. TPG has a long history of investments in the airline industry and has ended most of them by selling its stakes to the public.
TPG's Mr. Schifter said today that his firm fully endorses Midwest's plans to increase its capacity and enter the marketing arrangement with Northwest. "We're anticipating a return on our capital," he said. "Management's plan will drive a significant increase in profitability."
Mr. Hoeksema, Midwest's CEO, said his board is confident antitrust approval for the deal will be obtained, leading to the transaction closing in the fourth quarter. "There is strong [airline] competition in Milwaukee and no barrier to entry," he said. While Northwest and Midwest have 68% of the seats departing from that city, they only overlap on one nonstop flight. A combination of Midwest and AirTran would have controlled 64% of the seats and had seven overlapping nonstop flights, he said.
In American Stock Exchange trading this afternoon, Midwest shares rose 83 cents to $15.53. Northwest stock, traded on the New York Stock Exchange, gained 11 cents to $16.09. AirTran shares also traded on the Big Board, were up 27 cents to $10.24.
