An investment group that includes Northwest Airlines said it would buy Midwest Air Group for more than $400 million less than an hour after AirTran abandoned a two-year hostile takeover bid for the same carrier.
The investors, led by TPG Capital would convert Midwest Air to a privately held company.
The TPG offer, submitted Sunday, was superior to AirTran’s and will allow Midwest to proceed with its goals, Midwest executive Carol Skornicka said Monday.
“They’ve become familiar with our long-term plan and became persuaded of its value and bought into that,” said Midwest spokeswoman Carol Skornicka.
Midwest Air chairman and chief executive Timothy Hoeksema has fought to keep Midwest Airlines and Midwest Connect as standalone, regional airlines and out of the hands of AirTran Holdings Inc., which wanted Milwaukee as a second hub.
TPG’s $16-per-share cash offer to acquire all outstanding Midwest shares topped AirTran’s final offer — an increased bid of $15.75 a share that AirTran spokesman Tad Hutcheson said made the equity value of the transaction more than $431 million, based on Friday’s closing price of AirTran stock.
Midwest rose 32 cents, or 2.2 percent, to $14.55. AirTran shares rose 19 cents, or 1.8 percent, to $10.89. Shares for Northwest Airlines Corp. fell 19 cents to $18.33.
Northwest would effectively block AirTran from developing a hub in Milwaukee that could draw passengers who may otherwise use its 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 nine-member Midwest board of directors, which includes three appointed by AirTran, approved the TPG Capital offer late Sunday.
The deal will need approval from regulators, but Skornicka said Midwest is confident the agreement will pass review.
“The board was fully advised on antitrust issues and that it would close,” she said.
Midwest Air controls about 50 percent of the market at Milwaukee’s Mitchell International Airport, while Northwest has about 19 percent.
The Fort Worth, Texas-based TPG, plans to finance the transaction through its $15.3 billion TPG Partners V, L.P. fund, said Partner Richard P. Schifter.
“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,” Schifter said in a letter to Midwest.
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.”
Hirschman said Midwest has done a disservice to its shareholders, nearly two-thirds of whom had agreed to tender their shares to AirTran.
AirTran had raised its offer several times since an opening offer $78 million in June 2005.