Midwest Air shareholder against TGP Capital deal, supports merger with AirTran

By Lisa Kerner

Charlotte, N.C., Aug. 14 - Midwest Air Group, Inc. investor Pequot Capital Management, Inc. went on record with its concerns related to the board's decision to pursue an all-cash proposal from a private equity firm.

Midwest announced on Aug. 13 that it was pursuing an all-cash offer from TGP Capital, LP to acquire the company for $16.00 per share. The company's board unanimously approved the TGP offer and a definitive merger agreement was expected by Aug. 15.

Pequot is not convinced the offer is superior to the prior offer made by AirTran Holdings, Inc.

"Given that shareholders owning approximately 63% of Midwest's outstanding common stock recently expressed their approval of the AirTran offer, we think the board should keep both its mind and its options open with respect to a potential combination with AirTran," Pequot said in an Aug. 13 letter to the board. The letter was included in a schedule 13D filing with the Securities and Exchange Commission.

Air Tran had made a final offer for Midwest of $9.50 in cash and 0.5842 of a share of AirTran common stock, or about $15.75 per share.

However, on Aug. 14, AirTran came back to Midwest with a new $16.25-per-share offer for the company. The offer includes $10.00 per share in cash and 0.6056 of an AirTran share for a total value of some $445 million based on AirTran's closing stock price on Monday.

"Due to the large number of synergies available in a Midwest/AirTran transaction (which may not be replicated by a private equity buyer), we believe there is significantly more upside in AirTran's cash and stock offer than in a nominally higher all-cash deal," Pequot said in the letter.

The investor beneficially owns 2,184,200 shares, or about 8.8%, of the common stock of Midwest.

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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