An investors group that includes Northwest Airlines Corp. has offered to buy Midwest Air Group for more than $400 million, circumventing a hostile bid by AirTran Holdings Inc.
The investors, led by TPG Capital, of Fort Worth, Texas, would convert Midwest Air to a privately held company, according to a statement issued late Sunday.
Midwest Air Chairman and Chief Executive Timothy Hoeksema has fought to keep Midwest Airlines and Midwest Connect as stand-alone, regional airlines and out of the hands of AirTran, which wants to make Milwaukee a second hub.
The cash offer from TPG Capital to acquire all outstanding shares at $16 a piece topped a bid of $15.75 per share from AirTran, a price that spokesman Tad Hutcheson said made the equity value of the transaction in excess of $431 million based on Friday's closing price of AirTran stock.
The initial value of AirTran's offer was placed at $389 million based on its stock price at the time.
"The board concluded that the TPG offer presented greater value and certainty for Midwest shareholders than the AirTran offer," Midwest said in a statement.
Northwest would effectively block AirTran from developing a hub in Milwaukee that could draw passengers who may otherwise use Northwest hubs in Minneapolis, Detroit and Memphis.
Northwest would not participate in the management or control of Midwest should the TPG offer be finalized, the Eagan, Minn.-based airline said in a statement.
Midwest and TPG were expected to reach an agreement no later than Wednesday.
The deal must be approved by the U.S. Department of Justice.
Midwest Air controls about 50 percent of the market at Milwaukee's Mitchell International Airport, while Northwest has about 19 percent.
"We believe that our experience in this sector, together with our track record for maintaining stable, long-term investments, argue strongly in favor of an acquisition by TPG," Partner Richard P. Schifter said in a letter to Midwest's board of directors.
David Hirschman, another AirTran spokesman, said the Orlando, Florida-based parent company of AirTran Airways will return to its strategy of growing as a standalone business.
"We've said all along that this (deal) is something we'd like to do, not something we need to do," he said. "We've got great growth prospects independently and that's what we're going to focus on."
AirTran's tender offer technically expired Friday at midnight but both sides had until the market opened Monday to reach an agreement.
Hirschman said AirTran wasn't ruling out future talks. But he said Midwest has done a disservice to its shareholders, nearly two-thirds of whom had agreed to tender their shares to AirTran.
AirTran tried for months to takeover Midwest, raising its offer several times since an opening offer $78 million in June 2005. Midwest persistently rejected AirTran's offers, saying it would be more profitable alone.
Midwest's earnings have tumbled. In the second-quarter, Midwest's profit fell 45 percent, hurt by lower fares and higher fuel costs.
Twice this year Midwest has said it wouldn't meet its full-year profit expectations.
AP Business Writer Emily Fredrix contributed to this report.
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