Midwest Air recommends that shareholders reject AirTran's revised offer

By Lisa Kerner

Charlotte, N.C., April 14 - Midwest Air Group, Inc.'s board of directors unanimously recommended that its shareholders reject AirTran Holdings, Inc.'s revised offer to acquire all outstanding shares of Midwest for a combination of $9.00 in cash and 0.5842 of a share of AirTran common stock per Midwest share.

The transaction is valued at about $15.00 per share, for a total equity value of $389 million.

The board advised that shareholders not tender their shares to AirTran in the offer that expires May 16. As of March 30, 1,703,151 shares of Midwest common stock were tendered in the offer.

Midwest announced a new record date of May 11 for its annual meeting of shareholders, which is now scheduled for June 14, pushed back from May 23.

"Our board determined that AirTran's revised offer does not take into account the long-term value of our strategic plan," chairman and chief executive officer Timothy E. Hoeksema said in a company news release.

"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."

In addition, the board said it received an oral opinion from Goldman, Sachs & Co. on April 12 that the revised offer was financially inadequate.

AirTran first offered to acquire Midwest in October 2006 for $11.25 per share.

On Jan. 11, AirTran's wholly owned subsidiary Galena Acquisition Corp. began an offer for Midwest for $6.625 in cash and 0.5884 of a share of AirTran common stock per Midwest share in a deal valued at $345 million, or $13.25 per share.

Midwest's board also believes that the company's 2006 operating performance demonstrates the strength of the company's strategic plan. Traffic grew 21.5% in 2006, while unit revenue was up 12.5%, the release stated. Cost-reductions helped generate a $66 million improvement in operating income for 2006 compared with 2005.

The board said in rejecting the offer, it also took into account Midwest's updated forecast, reflecting preliminary results of the first quarter, as well as other developments over the past three months.

The value of the consideration being offered by AirTran is dependent on the value of AirTran's common stock, which has declined by 29% in the past 12 months, while Midwest's stock increased 158%, the company said.

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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