TPG to acquire Midwest

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.

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