Midwest again rejects unsolicited AirTran offer; AirTran urges Midwest holders to tender shares

By Jennifer Chiou

New York, Jan. 25 - AirTran Holdings, Inc. announced its disappointment after Midwest Air Group, Inc. again unilaterally rejected AirTran's offer to combine the two airlines while Midwest expressed feelings that the offer was "inadequate" and "opportunistic."

Midwest Air Group, the parent of Midwest Airlines, also reiterated its strategic plan and future growth prospects in the face of AirTran's previously announced unsolicited offer to acquire all outstanding shares of Midwest for a combination of $6.625 in cash and 0.5884 of a share of AirTran common stock.

AirTran Holdings, the parent company of AirTran Airways, said that Midwest did not hold direct talks with AirTran to explore the strategic and financial structure of such a merger.

"Despite the benefits that a combined AirTran and Midwest would bring to our respective shareholders, employees and the greater Milwaukee community, Midwest has continued to decline to meet with us to negotiate an agreement," AirTran's chairman and chief executive officer Joe Leonard said in a news release.

"We believe that the Midwest board and management have been negligent in meeting their fiduciary obligations to the Midwest shareholders, and we urge the company's owners to tender their shares to let the board and management of Midwest know that they want Midwest to explore the merits of the merger."

Midwest said its board, with its legal and financial advisors, reached its decision to reject the bid after careful consideration, which included what it said was a thorough review of the AirTran offer, the various alternatives available to Midwest and Midwest's strategic plan.

"Our board determined that AirTran's offer is opportunistic and undervalues Midwest," explained Timothy E. Hoeksema, chairman and chief executive officer, in the news release.

"The board believes that Midwest and its shareholders are poised to realize the benefits of Midwest's long-term strategic plan, and that today's earnings announcement indicates that those efforts are driving growth for the company."

Hoeksema pointed out in the release that the company made a series of investments in equipment and service during the airline industry's recent down cycle, and also noted that the industry is in recovery mode.

Midwest added that it believes the offer is timed to take advantage of the significant initiatives undertaken and investments made by Midwest during the recent down cycle in the airline industry.

AirTran's offer to exchange $13.25 of value in cash and AirTran stock for each share of Midwest for $13.25 per Midwest share represents a premium of 61% over the thirty day average closing price of Midwest common stock at the time of AirTran's Oct. 20 proposal and an about 46% premium over the closing price on the Dec. 13, the date on which AirTran disclosed its offer.

"With today's demands that corporate governance be of the highest caliber, strictly adhering to the best interests of shareholders, we are surprised that Midwest's board would act in such a precipitous manner and again decline to evaluate our offer without even discussing it with us," Leonard added in the release.

"Our offer not only grants shareholders a significant premium, it enables the existing Midwest owners to continue to have an equity interest in a airline better positioned to compete in a consolidating industry, with lower costs and a stronger more diversified route network. AirTran has the fleet, network breadth and cost expertise that Midwest needs, which, when combined with Midwest's network and service expertise, will result in one of the strongest low cost, high quality airlines in the world."

Midwest is a Milwaukee-based provider of jet service to primarily business travelers.

AirTran is the parent company of AirTran Airways, a low-fare airline based in Orlando, Fla.

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