AirTran Airways executives were elated to learn that Midwest Airlines shareholders voted 57 percent of the company's shares in favor of AirTran's hostile buyout bid.
But majority backing for the tender offer, announced Thursday, doesn't end the battle. Midwest's top managers said they will keep fighting to stay independent, and they announced an alliance with Northwest Airlines on Thursday meant to expand the reach of their Milwaukee-based carrier.
Financial analysts said AirTran's strong showing puts pressure on Midwest to sell, or at least negotiate. Midwest's extensive "poison pill" defenses remain, however, and company officials say they intend to keep them.
"This fight is far from over," said William McGinnis, financial analyst at W. McGinnis Advisors in Milwaukee. "AirTran isn't giving up. Midwest isn't giving in. They both seem unlikely to change their positions based on [Thursday's] results."
AirTran extended the tender offer to June 8, hoping to build on the majority. The result also makes it likelier an AirTran-backed slate of three new directors will be elected to Midwest's board later in June, adding to the pressure to sell.
AirTran has been seeking to buy Midwest since 2005 and, after being privately rebuffed, launched a hostile takeover bid last year. The current bid is $15 a share, or $389 million.
"We are extremely pleased with the response we are seeing from Midwest's shareholders," said AirTran Chief Executive Joe Leonard. "We would expect Midwest's management to take this as a serious vote of no confidence in Midwest's risky go-it-alone plan and a clear message to meet formally with AirTran to discuss the terms of a merger agreement."
Midwest officials say their board retains "total control" of the company, and that they are under no obligation to merge or negotiate with AirTran.
"Our board is steadfast in its view that the AirTran offer is inadequate," said Carol Skornicka, Midwest's general counsel. "I'm quite confident the results of this straw poll won't change that view."
Late Thursday, Midwest announced a "code share" deal with Northwest, through which each airline sells seats on the other's flights.
Skornicka said the deal will add 250 city-pairs and allow customers to book travel and earn mileage awards on both carriers.
"We haven't put a value on it --- and we probably won't," she said. "But it was part of the board's thinking in rejecting AirTran. And there are other aspects of our strategic plan that we'll release when it's appropriate."
Wisconsin law offers extensive anti-takeover provisions, and Midwest said it won't give them up. Companies based there can issue additional stock, for example, if a party acquires more than 15 percent of its shares. The state also encourages companies to consider potential harm to employees and communities from hostile takeovers.
The AirTran bid is deeply unpopular in Wisconsin, where more than 32,000 people have signed an electronic petition to keep Midwest independent.
While AirTran's tender offer commits the company to buy Midwest shares for $9 cash plus AirTran stock, the transaction won't actually happen unless Midwest drops its anti-takeover stance. So Midwest shareholders who voted for AirTran's offer are indicating support for a deal, even though their shares haven't actually changed hands.
The next phase in the test of wills moves to the Midwest boardroom.
AirTran will find out at the company's annual meeting June 14 whether its slate of directors is elected. Once on the board, they would presumably advocate a deal from within the airline.
Midwest's Skornicka said AirTran candidates will be welcomed if elected.
"When they learn details of our strategic plan, they'll be persuaded of the long-term value of remaining independent, just as other board members have been," she said.
Darryl Jenkins, a professor at George Washington University's Aviation Institute, said AirTran is likely to prevail --- although it won't be easy or quick.
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