AirTran Facing Long Campaign
MILWAUKEE _ AirTran Holdings Inc.’s hostile takeover attempt of Midwest Air Group Inc. is shaping up as a long campaign, with AirTran extending the deadline for its buyout offer and nominating an alternative slate of directors for Midwest’s board.
“This could continue to drag along very slowly,” said Brian Nelson, an analyst at Morningstar Inc. in Chicago. “Obviously, this is going to take some time, and AirTran is aware of that.”
AirTran said Thursday it is extending its offer of $13.25 a share to March 8, “so that Midwest’s shareholders can receive all the information they need.” The offer had been set to expire Feb. 8.
AirTran has sued the Oak Creek, Wis.-based parent company of Midwest Airlines and regional carrier Midwest Connect to obtain a list of shareholders. A New York judge is expected to issue a ruling on the lawsuit soon.
So far, only about 39,000 shares of Midwest stock have been tendered to AirTran, which is based in Orlando, Fla. That amounts to less than 1 percent of Midwest’s shares outstanding.
However, large amounts of shares typically are not tendered until the final days of such offers, Nelson said. AirTran spokesman Tad Hutcheson agreed, and said the company is “encouraged” by the response.
The deadline “is not meaningful,” Nelson said. “It’s only there to keep things moving along.”
AirTran could quicken the pace by sweetening its offer again, Nelson said. AirTran raised its offer by $2 a share on Jan. 11.
“If AirTran had made an offer shareholders couldn’t refuse, we’d have expected more shares to be tendered,” said analyst Craig Kennison of Milwaukee investment firm Robert W. Baird & Co.
“Given that fewer than 1 percent have been tendered and that AirTran extended the deadline, it seems most shareholders are not convinced,” Kennison said. “I think shareholders want more money, not more time.”
AirTran said it is nominating three candidates for Midwest’s nine-member board, with the election to occur at Midwest’s next annual shareholders meeting. Those meetings traditionally have been held in April, an indication that AirTran expects to still be pursuing its hostile bid then.
“The slate has been filed today, and we are going to see this through,” AirTran President Robert Fornaro told industry analysts at the Raymond James Growth Airline Conference in New York.
AirTran is nominating the slate because it believes Midwest’s directors and executives are more concerned about their own jobs than the interests of Midwest shareholders, AirTran Chairman Joe Leonard said in a statement.
That statement said the average tenure of the board is 14 years, and that some members have served up to 23 years _ which Leonard referred to as “entrenchment.”
Fornaro, speaking at the Raymond James conference, said a merger would provide much-needed diversification for both AirTran, which is heavily concentrated in Atlanta, and Midwest, which is the dominant airline in Milwaukee.
“We believe both companies benefit from a stronger route network,” Fornaro said.
In response, Midwest Air reiterated its plan to remain a standalone airline and defended the board’s recommendation that shareholders reject AirTran’s offer.
“Our board stated its belief that the AirTran offer does not fully reflect the value of Midwest’s strategic plan, including our strong market position and future growth prospects,” the company’s statement said. “Our board also stated its belief that the timing of the AirTran offer is opportunistic and that the offer is disadvantageous to Midwest’s shareholders.
“Our recent earnings announcement shows that we had our third profitable quarter in a row _ clear evidence of the strength of our strategic plan,” the statement said.
Midwest Chairman Timothy Hoeksema, also speaking at the Raymond James conference, said a rise in Midwest’s stock price over the past 12 months was “helped a little bit” by the AirTran offer.
“But in and of its own right,” Hoeksema said, Midwest’s stock price has “done extremely well.”
Midwest, with a 52-week low of $4 a share, closed Thursday at $13.51, up 16 cents. AirTran closed at $11.12, up 5 cents.
Meanwhile, the attorney for a shareholder who sued Midwest Air hinted that the lawsuit _ dismissed earlier this week _ could be refiled.
“We are monitoring the situation for a number of institutional investors, and will decide what steps to take over the next few days,” said Gregory Nespole, whose New York firm filed the suit in Milwaukee County Circuit Court. That suit was dismissed upon the request of Nespole and his client, shareholder Linda Garrett of Lufkin, Texas.
The suit was seeking a judge’s order that would suspend the company’s “poison pill” provision, paving the way for AirTran to acquire Midwest. The suit also sought class-action status.
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A survey of 300 travelers who fly out of Milwaukee and Atlanta found a large share opposed to AirTran’s hostile takeover bid for Midwest Air Group. According to the survey, commissioned by the National Pilots Association:
_48 percent of the respondents “strongly opposed,” and 9 percent “somewhat opposed,” the merger.
_11 percent of 150 frequent fliers from Atlanta were “strongly opposed” and 9 percent “somewhat opposed.”
_84 percent of 150 Milwaukee travelers were “strongly opposed” and 8 percent were “somewhat opposed.”
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AirTran’s nominees to Midwest’s board of directors are:
_Jeffrey Erickson, retired president and CEO of Atlas Air Worldwide Holdings Inc., an air cargo carrier based in Purchase, N.Y.
_Charles Kalmbach, recently resigned president and CEO of DBM INC., a Philadelphia human resources firm.
_John Albertine, chairman, CEO and founder of Albertine Enterprises, a Washington, D.C., lobbying firm.
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