AirTran's bid to acquire and merge with
Midwest Air Group got a boost on June 14, when Midwest shareholders
elected three merger-friendly directors to the airline's board.
The three directors
had been nominated by AirTran. Midwest's board consists of nine
directors.
In response to the
vote, the airline decided to let AirTran make a presentation to the
board regarding AirTran's proposal. The date for that meeting has
not been set.
"While we are
disappointed by today's results, we recognize that our shareholders
have spoken," said Timothy Hoeksema, Midwest's chairman and CEO.
"If today's election says anything at all, it says that our
shareholders want us to listen, and that is what we intend to
do."
The vote for
directors came at Midwest Air Group's annual shareholder meeting in
Milwaukee. The preliminary election results will become official
when an independent inspector of election certifies the results,
which is expected to happen on June 26.
AirTran Chairman
and CEO Joe Leonard said the vote proved there is a "strong desire"
among Midwest shareholders "for Midwest to fully and fairly
consider the merits of a combination with AirTran."
"We believe these
three new directors will bring a fresh, independent perspective to
the Midwest board and will encourage the board to fully explore its
strategic options, including sitting down with us to fully evaluate
how a merger with AirTran can provide greater value for the Midwest
shareholders, employees and customers," Leonard said.
AirTran's tenacity rewarded
AirTran had
nominated three merger-friendly members for the board because
current board members had been steadfastly resisting AirTran's
offer, which led AirTran to make its bid directly to
shareholders.
On April 2, AirTran
increased its offer for Midwest for a second time, by $44 million,
to a total of about $389 million.
The AirTran offer
is for $15 a share, consisting of $9 in cash and 0.5842 of a share
of AirTran stock for each Midwest share.
The higher offer
seemed to resonate with shareholders. AirTran recently revealed
that, as of May 16, approximately 57% of all outstanding shares in
Midwest had been tendered in response to its takeover
offer.
But that didn't
sway Midwest's management or board, which rejected the higher
bid.
In explaining the
rejection of that offer, Hoeksema said the board had "determined
that AirTran's revised offer does not take into account the
long-term value of our strategic plan."
"The board believes
that Midwest's future holds great promise and that the best
interests of all stakeholders lies in Midwest continuing to execute
its plan," he said.
The board cited
Midwest's "strong" operating performance in 2006, including traffic
growth of 21.5%, unit revenue growth of 12.5% and yield improvement
of 5.4%.
Those factors
contributed to a $66 million improvement in operating income and a
$5.4 million profit in 2006, following a year in which the airline
lost $64.9 million.
Midwest reported an
$8 million profit for the first quarter of 2007.
Midwest, however,
has already lowered its earnings forecast twice this year. AirTran
has been using that as ammunition to argue that Midwest's strategic
plan will not work as advertised.
AirTran reported an
$8.1 million profit in 2005, a $15.5 million profit in 2006 and a
$2.4 million profit for the first quarter of this year.
AirTran's 2006
results included a 30.5% increase in operating revenue for the
rapidly growing carrier, which added 20 aircraft in 2006 and
increased its traffic by 22.4%.
To
contact reporter Andrew Compart, send e-mail to [email protected].