"Deal could hand Northwest the keys to Midwest"

Saturday, August 18, 2007

Deal could hand Northwest the keys to Midwest
The airline's decision to sell to a private-equity firm means it may end up
in its rival's hands.
The Associated Press


MILWAUKEE - Northwest Airlines Corp. could end up owning rival Midwest Air
Group Inc., which has agreed to sell to 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
yesterday morning.

The equity firm may eventually want to cash out of the deal, he said, and
Northwest could be the sole owner. But Schifter cautioned that could be
several years away.

Midwest's decision to sell to TPG came late Thursday night and ended months
of dealings with another rival, AirTran Holdings Inc.

Midwest said TPG would pay $17 a share cash, which values the deal at $450
million based on Midwest's 26.6 million shares outstanding.

AirTran's hostile-takeover attempt of Midwest stretched back two years to an
initial bid of $78 million in June 2005.

The Orlando, Fla., carrier's last offer, a cash-and-stock deal, was worth
about $16.04 a share, or $427 million.

AirTran chairman and chief executive officer Joe Leonard said yesterday in a
statement that he had hoped to reach a consensual agreement with Midwest,
but added, "we accept the Midwest board's decision."

AirTran shares rose 19 cents, or 1.9 percent, to close yesterday at $10.16;
Midwest shares rose 85 cents, or 5.8 percent, to $15.55; and Northwest
shares were up 18 cents, or 1.13 percent, at $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 passive 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 there
behind Midwest. More than half of the flights leaving from Milwaukee are
Midwest's.

TPG Capital, formerly Texas Pacific Group, has invested in other airlines,
including Continental, America West and Ryanair. Schifter said it would have
many options if it eventually wanted to sell its stake in Midwest, including
selling it back into the public market.

The firm typically holds investments for several years so a deal, including
a sale to Northwest, would most likely be years in the making, Schifter
said. It took more than 11 years for TPG to sell its stake in America West,
he said.

 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************