Buyer says Northwest may one day own Midwest
MILWAUKEE -- Northwest Airlines Corp. could end up owning rival Midwest Air Group, which has agreed to a $450 million buyout offer from private equity firm TPG Capital.
Northwest is a passive investor in the deal and may eventually buy Midwest outright, TPG partner Richard P. Schifter said in a conference call Friday.
The equity firm may want to cash out of the deal some day, he said, and Minneapolis-based Northwest could become the sole owner. Schifter said such a move could be several years away.
Midwest's decision to sell to TPG came late Thursday night and ended months of back-and-forth with another rival, AirTran Holdings.
Midwest said TPG will pay $17 per share cash, worth about $450 million based on Midwest's 26.6 million shares outstanding.
Orlando, Fla.-based AirTran's hostile takeover attempt of Midwest stretched back two years to an initial bid of $78 million in June 2005.
Its last offer, a cash-and-stock deal, was worth about $16.04 a share, or $427 million.
AirTran Chairman and CEO Joe Leonard said Friday in a statement he had hoped to reach a consensual agreement with Midwest but added, "we accept the Midwest board's decision."
AirTran shares rose 22 cents, or 2.2 percent, to close at $10.19 on Friday, while Midwest shares ended up at $15.55 after rising to a 52-week high of $16 earlier in trading. Northwest shares rose 18 cents to $16.16.
Northwest approached TPG about joining in a buyout of Midwest, Schifter said.
"We concluded there was a combination that would make sense and began in earnest frankly just a few weeks ago," he said.
Northwest is a minority investor in the deal, said Schifter, who would not disclose the airline's level of involvement. Northwest spokesman Darren Shannon declined to comment.
The deal is subject to antitrust approval. Midwest Chairman and Chief Executive Timothy E. Hoeksema has said the company worked with lawyers to ensure it would pass. He said they would begin discussions with federal officials in the next two weeks.
Northwest has said it would not participate in Midwest's management should the TPG deal go through.
Northwest accounts for about 18 percent of the traffic at Milwaukee's Mitchell International Airport and is the second-largest carrier behind Midwest. More than half of the flights leaving from Milwaukee are Midwest.
TPG Capital, formerly Texas Pacific Group, has invested in other airlines, including Continental, America West and Ryanair.
Hoeksema said Midwest was pleased with the transaction but did not comment specifically on Northwest's involvement.