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    Midwest Investor Sees Hope for AirTran Offer

    March 27, 2007
    A New York hedge fund believes AirTran's offer is too low, but thinks a merger -- at a better price -- "makes enormous strategic sense."

    Source The Atlanta Journal-Constitution

    A New York hedge fund that owns more than 5 percent of Midwest Airlines stock is encouraging the company to seriously consider a merger with AirTran if the discount carrier increases its offer.

    AirTran launched a hostile bid for Midwest in December, offering $345 million in a cash and stock deal. But Midwest has consistently rebuffed AirTran and called its most recent offer of $13.25 a share "inadequate and opportunistic."

    In a letter to Midwest's board released Monday, Richard Hurowitz, chief executive of Octavian Advisors, encouraged Midwest directors to carefully consider a merger if AirTran ups its price.

    "Octavian does not currently believe that the AirTran proposal reflects the full value of Midwest," Hurowitz said. "We do believe, however, that under the right terms a combination of the two companies makes enormous strategic sense ...

    "In the event AirTran were to materially increase its offer for Midwest ... we would strongly encourage and expect the board and management team of Midwest to abide by their fiduciary duties and immediately enter into good faith negotiations to effectuate a transaction."

    An AirTran tender offer, made directly to shareholders after management rebuffed a merger, has gotten a cool reception. About 7.4 percent of Midwest shareholders have agreed to sell their shares. The current offer expires April 11 and can be renewed indefinitely.

    AirTran also is seeking to install three of its own candidates on Midwest's 12-member board at the airline's next annual meeting, but no meeting date has been set.

    Carol Skornicka, Midwest's general counsel, said Octavian's position supports the Milwaukee-based carrier's contention that AirTran's offer is too low.

    "All the investors agree that the current offer is inadequate," she said. "That's what Octavian seems to be saying as well."

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