AirTran, Midwest Merger DEAD!

[Lear70]

I think there is a high probablity that AirTran will be bought by SWA.

No, no, no, you've got it all backwards.

AAI is going to be purchased by Champion with NWA money.

All our 737's will then go to Southwest and the 717's will replace the 727's for all the charters.

The 727's will go back in service with "white glove treatment" into the MEH system, including the cookie ovens. THAT'S the super-secret growth plan. Now you know!

Wonder if I could bid over? To the 727 of course... Automation is for wimps.

 

[Toecutter]

we are all owned by money-men. again nwa is a minority shareholder. you're telling me that after spending $400 million in cash TPG just wants MEH to go away?

NOt sure? WHy don't you ask Frank Lorenzo. Standard corporate raider playbook. 1. Break the unions 2. upsteam profits into a holding company. 3. sell off assets. 4. declare bankruptcy and make off with the loot.

 

[deadstick]

Did I miss something?

This is from MarketWatch:

SAN FRANCISCO (MarketWatch) --

... A 4.4% rally in the shares of Mesa Air Group (MEH ) helped lift the larger Dow Jones Wilshire Airlines index 0.9%. Over the weekend, Mesa Air agreed to an all-cash offer of $16 a share from TPG Capital, shunning a hostile proposal from AirTran Holdings.

 

[ultrarunner]

Wow. A lot of interesting ideas. Here's what I get out of it.

1. I thought Midwest didn't want to sell. To anybody.

They didn't prop. AAI forced Midex to sell. If Midex had NOT lined up a buyer at 16 bucks, when AAI offer expired, MEH stock would have tanked back to 8 or 8 bucks, or even lower.

THAT would have caused all kinds of problems for MEH. They essentially HAD to find a buyer.

 

[fam62c]

Why didn't TPG just do this alone?

I'm a little confused by this whole deal. IF TPG sees enough hidden or future value to get it's 16/share plus a high ROI back from Midwest at some point why would it get NWA involved in this deal? Personally, I don't see how TPG is going to get it's money back but these people are smart so they must have an exit strategy. I can guarantee that a lot of MEH cash will find it's way into the pockets of TPG in the form of "fees." I can also guarantee that MEH will be loaded up with as much debt as it can possibly handle to pay for any growth that will happen to make the company look better for a future sale. TPG buys companies and sells them to the public or another company at a profit......it's just what private equity does. In this case there must be something I'm not seeing because I sure don't see MEH being a good value at 16/share. I also think that the airline industry a risky place for investment because there are so many factors that can't be controlled.

There's a chance that what TGP is really doing here is essentially acting as a broker for a sale of MEH to NWA. TPG takes MEH private to thwart AAI and get the stockholders out of the picture. As time goes by NWA slowly buys out TPG (at a nice profit for TPG) or buys selected MEH MKE assets (thus avoiding a merger) from TGP. TGP would continue to collect cash from MEH while this is happening in the form of management and deal-making fees. TGP could use MEH debt (and proceeds from selling stuff to NWA) to fund expansion of the MCI hub and once NWA has taken what they want from the MKE operation they do an IPO of the MEH certificate and operation as a MCI based carrier. Everybody walks away with what they want: TPG gets it's money back and a nice ROI, NWA gets rid of a competitor once and for all and prevents a MKE LCC hub. I think that if the asset sales are done gradually enough there won't be any antitrust issues. MKE, unfortunately loses out as the hub eventually is cherry-picked of the best routes and slots for NWA mainline and everything else is done on NWA affiliate RJ's. Think STL after AMR bought out TWA.

This is all speculation but I smell a rat in the form of the NWA investment. If this was 100% TPG I would still wonder why they were buying MEH because I don't see the "hidden value" here but there would be a chance that TPG would clean up MEH and use MEH debt to grow the company for another IPO. With NWA buying in I just don't see the incentive to grow MEH in MKE even if NWA has a stake.

I also wonder about the future roles of Skyway and Skywest. TGP will be buying Skyway when they buy MEH and Skyway has a terrible fleet and operation problems that make it a drag on earnings. I don't see Skyway and Skywest both staying around......either Skyway needs a major investment to make it viable or it needs to be killed off with Skywest left to do all the work. On another subject, I'm amazed that the MEH MEC Chairman went public with his comments. If he believes what TGP is telling him he could end up looking like a fool. Once this deal is done and MEH is private there will be huge pressure for MEH to "pay" TPG back. Good luck to the Midwest MEC on their next contract.....they're going to need it.

 

[Schwanker]

southwest loaned ATA money, which is completely different than here. northwest is a minority stakeholder. i was speaking of when ATA grew in the mid to late 90's.

we shall see...

What's your definition of a minority shareholder? Don't be surprised if NWA put up the vast majority of the $$ in this deal. The level of NWA's investment has not been disclosed. I think "passive investor" is a better description. How passive is yet to be seen, although I don't think you'll see much in the immediate future.

 

[Schwanker]

I'm a little confused by this whole deal. IF TPG sees enough hidden or future value to get it's 16/share plus a high ROI back from Midwest at some point why would it get NWA involved in this deal? Personally, I don't see how TPG is going to get it's money back but these people are smart so they must have an exit strategy. I can guarantee that a lot of MEH cash will find it's way into the pockets of TPG in the form of "fees." I can also guarantee that MEH will be loaded up with as much debt as it can possibly handle to pay for any growth that will happen to make the company look better for a future sale. TPG buys companies and sells them to the public or another company at a profit......it's just what private equity does. In this case there must be something I'm not seeing because I sure don't see MEH being a good value at 16/share. I also think that the airline industry a risky place for investment because there are so many factors that can't be controlled.

There's a chance that what TGP is really doing here is essentially acting as a broker for a sale of MEH to NWA. TPG takes MEH private to thwart AAI and get the stockholders out of the picture. As time goes by NWA slowly buys out TPG (at a nice profit for TPG) or buys selected MEH MKE assets (thus avoiding a merger) from TGP. TGP would continue to collect cash from MEH while this is happening in the form of management and deal-making fees. TGP could use MEH debt (and proceeds from selling stuff to NWA) to fund expansion of the MCI hub and once NWA has taken what they want from the MKE operation they do an IPO of the MEH certificate and operation as a MCI based carrier. Everybody walks away with what they want: TPG gets it's money back and a nice ROI, NWA gets rid of a competitor once and for all and prevents a MKE LCC hub. I think that if the asset sales are done gradually enough there won't be any antitrust issues. MKE, unfortunately loses out as the hub eventually is cherry-picked of the best routes and slots for NWA mainline and everything else is done on NWA affiliate RJ's. Think STL after AMR bought out TWA.

This is all speculation but I smell a rat in the form of the NWA investment. If this was 100% TPG I would still wonder why they were buying MEH because I don't see the "hidden value" here but there would be a chance that TPG would clean up MEH and use MEH debt to grow the company for another IPO. With NWA buying in I just don't see the incentive to grow MEH in MKE even if NWA has a stake.

I also wonder about the future roles of Skyway and Skywest. TGP will be buying Skyway when they buy MEH and Skyway has a terrible fleet and operation problems that make it a drag on earnings. I don't see Skyway and Skywest both staying around......either Skyway needs a major investment to make it viable or it needs to be killed off with Skywest left to do all the work. On another subject, I'm amazed that the MEH MEC Chairman went public with his comments. If he believes what TGP is telling him he could end up looking like a fool. Once this deal is done and MEH is private there will be huge pressure for MEH to "pay" TPG back. Good luck to the Midwest MEC on their next contract.....they're going to need it.

You're correct. I believe TPG is a broker for NWA. I would venture to guess TPG has less $ into this than NWA.

Have you ever heard of Bonderman?

 

[lowecur]

What's your definition of a minority shareholder? Don't be surprised if NWA put up the vast majority of the $$ in this deal. No, TPG can only get dominant control with at least 51%. There are a few other minority investors other than NWA. The level of NWA's investment has not been disclosed. AAI has spys on the board, and they know what NWA's investment is. I think "passive investor" is a better description. How passive is yet to be seen, although I don't think you'll see much in the immediate future.

Lot's of scenerios can play off this move.

• TPG can go after AAI down the road when their stock price is lower(that's the synergy for making money). AAI stock price could shrink by 33% in the next 6 months as economy faulters (good time for TPG to make offer).
• TPG has a backdoor agreement with NWA that will benefit TPG at some pt in the future for stonewalling an AAI/MEH deal.
• No way this deal was put together for a SWA/AAI merger. That would hurt TPG/MEH/NWA.

imp:​

 

[Schwanker]

Lowcur,
TPG's stake may be fully or partially financed by a "passive" investor. It doesn't necessarily come out of pocket. Just a thought.

Schwanker

 

[Coloaviator]

Some have said Skywest would have first right or refusal to purchase Midwest. The rumor that Skywest is purchasing Midwest is heating up. They have to spend their billion in cash on something, maybe this is what they have been saving it for. This (MKE) would be a place where they wouldn't step on the toes of United or Delta either.