AirTran Extends Tender Deadline For Midwest

Mainland · Thu Feb 01, 2007 9:23 pm

Getting a bit messier. As expected, they're extending the offer deadline to give Midwest shareholders more time to tender their shares. Off the wire:

AirTran extends Midwest takeover offer, proposes directors
http://www.marketwatch.com/News/Stor...F727F59CA%7d&siteid=yhoo&dist=yhoo

LONDON (MarketWatch) -- AirTran Holdings said it's going to extend its hostile takeover for Midwest Air Group to March 8, from an earlier deadline of Feb. 8, so that Midwest shareholders can receive all the information they need. AirTran also proposed adding three directors -- Jeff Erickson, Charles Kalmbach and John Albertine -- to Midwest's board. AirTran is offering about $345 million in cash and stock for Midwest.

Company release from AirTran:
http://biz.yahoo.com/prnews/070201/nyth049.html?.v=85

[Edited 2007-02-01 13:48:17]

Mainland · Thu Feb 01, 2007 9:29 pm

More info, only 38,966 Midwest shares have been tendered as of Jan 31.

Source:
http://yahoo.reuters.com/news/articl...18_N01201259&type=comktNews&rpc=44

quickmover · Fri Feb 02, 2007 12:05 am

I don't quite understand how extending the offer will help. Maybe some of the bigger shareholders won't tender until the last minute. 40,000 shares is unbelievable considering where the stock was trading before the offer.

I'm starting to think this deal won't happen. YX's publicity campaign against FL makes me wonder if FL should even want to pursue this deal. They have really "Poisoned the water" so to speak. FL is really looking like the bad guys here and they don't deserve it IMO.

I still think there is nothing special about YX's plan to expand with crj200s. There is no way to make those jets as comfortable as their 717s in 2x2 seating (or even 2x3 for that matter). If the crj200 is their plan for the future, they need to remember how it worked out for Independence Air.

Corsair2 · Fri Feb 02, 2007 12:33 am

JL would do his company a better service to increase the company's earnings per share value. FL's earnings per share were the lowest in the industry for 2006. The attempt at buying YX is laughable at this point if only 38,000 shares have been acquired. I can see the ticker on the wall over at the Galena Corporation - 9,000,000 shares to go!

BTW, Midwest's earnings estimate for this year is 1.70/ share which would put their stock price at near $25/ share at a modest P/E ratio by the year's end.

TVNWZ · Fri Feb 02, 2007 1:00 am

Joe Leonard will find out very quickly if Northwest Mutual and Heartland want to play ball. this could be very embarrassing to him and the company if the board election fails by a wide margin, which is what I expect.

FL must be getting desperate because they know who has the largest blocks of shares and they know who they have to convince. But, they are acting like they don't. This comes across as either business stupid or business naive. Either way, it is getting them zero respect with the institutional shareholders they have to convince. I do not understand this strategy. It smells desperate, unsophisticated, and ignorable.

quickmover · Fri Feb 02, 2007 1:06 am

I wonder if a F9/FL merger has ever been considered seriously. I know the old argument about the fleet types not matching up, but look how well USAir is doing with numerous fleet types. Maybe it doesn't matter as much as thought.

positiverate · Fri Feb 02, 2007 1:24 am

I always viewed this merger as AirTran's response to the US/DL proposal, believeing that AirTran felt they needed to do this deal to increase their relative size to a combined US/DL at ATL. I wonder if AirTran 's committment to the deal will wane now that US/DL is dead.

steeler83 · Fri Feb 02, 2007 1:29 am

Quoting Positiverate (Reply 6):
I always viewed this merger as AirTran's response to the US/DL proposal, believeing that AirTran felt they needed to do this deal to increase their relative size to a combined US/DL at ATL. I wonder if AirTran 's committment to the deal will wane now that US/DL is dead.

Interesting statement. I would like very much for that to happen, as I do not want to see YX disappear. That would make sense if that were to happen, and if that is why FL wanted to take YX over. Others have said that it was so that FL could go into MKE, and acquiring YX was their way in...

Mainland · Fri Feb 02, 2007 1:53 am

I would've expected a bit more shares to be tendered at this point. From AirTran's point of view, they'll say they haven't had the shareholder list, the time to get their message out there, etc., etc.. Regardless, a majority of shareholders won't understand the details of this deal and will just vote along the lines of what the board tells them. This certainly seems to be the case so far. AirTran hasn't filed anything with the SEC yet, I imagine they'll wait to the Feb 8th expiration to formally file their extention, but when they do they'll say how many shares have been tendered to that point. It'll be interesting to see how much a difference a week makes.

To that end, I don't know what good putting up their own slate of directors will do. Midwest will recommend their shareholders vote against AirTran's three and that should be that.

quickmover · Fri Feb 02, 2007 2:09 am

Are the directors elected at the annual meeting? If so, when is it?
Thanks

Mainland · Fri Feb 02, 2007 2:21 am

Yes, directors are elected at the annual meeting. Proxy forms have not been filed with the SEC yet, but Midwest has held its meeting between April 20th - 26th in past years, so it should fall within that range again this year. The shareholder of record date to vote at the meeting should fall within the first week of March.

deltadawg · Fri Feb 02, 2007 5:59 am

If, and if the FL appointed folks were elected to the BOD, what real impact would it have? Is there any filibustering that the three FL appointees could carry out to help persuade the rest of the BOD or shareholders?

If elected could they call for the termination of Tim Hoeksema or others on the board? Also, could they move for a termination of the poison pill?

Quoting Quickmover (Reply 5):
I wonder if a F9/FL merger has ever been considered seriously. I know the old argument about the fleet types not matching up, but look how well USAir is doing with numerous fleet types. Maybe it doesn't matter as much as thought

I too like the idea of FL/F9 as a marriage. Considering the strong hub sites of ATL, MCO & DEN along with the focus cities of BWI, BOS, maybe SFO just seems to go well together. Fleet commonality can be absorbed and worked around I believe as well. The only problem though is that F9 is strapped for gate space at DEN just like FL at ATL. But with the western destinations that F9 has already perhaps they could build SFO, ONT or SJC into a West Coast hub and have a place to park the incoming 737's.

srbmod · Fri Feb 02, 2007 6:13 am

Quoting Quickmover (Reply 5):
I wonder if a F9/FL merger has ever been considered seriously. I know the old argument about the fleet types not matching up, but look how well USAir is doing with numerous fleet types. Maybe it doesn't matter as much as thought.

That boat sailed a number of years ago, IMHO. While some think that the marketing agreement between the two airlines may be the precursor to an eventual merger, I envision it as the formative stages of an LCC alliance.

Quoting Positiverate (Reply 6):
I always viewed this merger as AirTran's response to the US/DL proposal, believeing that AirTran felt they needed to do this deal to increase their relative size to a combined US/DL at ATL. I wonder if AirTran's committment to the deal will wane now that US/DL is dead.

Considering that the original offer made to Midwest was made in October of 2006 (And the offer was made public after the US buyout offer to DL), and US Airways' bid wasn't made public until November 15th, that's probably not the case. So unless FL had some insider info on the buyout deal, I doubt it played any role in their decision to go after YX. AirTran is pursuing Midwest in order to gain a midwestern hub in which to grow from. For the foreseeable future, their operations @ ATL is getting close to being maxed out. Even if US/DL were to have merged, it probably would have only led to a small increase in service at ATL, presumably to cities in the region that DL (or DL Connection) didn't fly to out of ATL.

positiverate · Fri Feb 02, 2007 6:18 am

Quoting Srbmod (Reply 12):
Quoting Positiverate (Reply 6):
I always viewed this merger as AirTran's response to the US/DL proposal, believeing that AirTran felt they needed to do this deal to increase their relative size to a combined US/DL at ATL. I wonder if AirTran's committment to the deal will wane now that US/DL is dead.

Considering that the original offer made to Midwest was made in October of 2006 (And the offer was made public after the US buyout offer to DL), and US Airways' bid wasn't made public until November 15th, that's probably not the case. So unless FL had some insider info on the buyout deal, I doubt it played any role in their decision to go after YX. AirTran is pursuing Midwest in order to gain a midwestern hub in which to grow from. For the foreseeable future, their operations @ ATL is getting close to being maxed out. Even if US/DL were to have merged, it probably would have only led to a small increase in service at ATL, presumably to cities in the region that DL (or DL Connection) didn't fly to out of ATL.

Perhaps, but their December announcement of a hostile takeover came after the US/DL news, which gives me the impression that the need to acquire Midwest became more urgent in their minds once US/DL announced.

deltadawg · Fri Feb 02, 2007 6:26 am

Quoting Positiverate (Reply 13):
Perhaps, but their December announcement of a hostile takeover came after the US/DL news, which gives me the impression that the need to acquire Midwest became more urgent in their minds once US/DL announced.

I believe the urgency is to find a hub airport that they can grow that is not on the East coast and has plenty of gate space for incoming 737's. The fact that YX has some extra 717 lying around doesn't hurt either.

TVNWZ · Fri Feb 02, 2007 6:27 am

Quoting DeltaDAWG (Reply 11):
If, and if the FL appointed folks were elected to the BOD, what real impact would it have? Is there any filibustering that the three FL appointees could carry out to help persuade the rest of the BOD or shareholders?

If elected could they call for the termination of Tim Hoeksema or others on the board? Also, could they move for a termination of the poison pill?

If they were elected the airline would be sold immediately to Airtran. The institutional invstors who control the lions share of stock would not vote for the Airtran directors if they supported current Midwest management. If they voted for the Airtran directors they would be telling Tim to sell. The other board members would have no choice but vote for Airtran's offer given that outcome.

However, Airtran will fail, possibly embarrassingly so.

quickmover · Fri Feb 02, 2007 6:56 am

Quoting DeltaDAWG (Reply 11):
The only problem though is that F9 is strapped for gate space at DEN just like FL at ATL.

I think that problem has been fixed. United gave up 6 gates on A. I know it's not alot, but perhaps enough for the next year or two. I believe YX will eventually be back on the market down the road. How does DEN, MKE, MCI, BWI, ATL, MCO sound for hubs and focus cities?

mke717spotter · Fri Feb 02, 2007 10:14 am

Quoting Mainland (Reply 1):
only 38,966 Midwest shares have been tendered as of Jan 31

I dont know much about stocks and stuff, so is that a lot or not really at this point for FL to pull this off?

sideflare75 · Fri Feb 02, 2007 11:14 am

Quoting Mke717spotter (Reply 17):
I dont know much about stocks and stuff, so is that a lot or not really at this point for FL to pull this off?

It is less than 1% of the outstanding shares of YX. Not good if that is all they can get but I'm sure that will change. Or maybe it won't. My guess is they will have to raise the offer if they want more support from the shareholders.

Mainland · Fri Feb 02, 2007 11:18 am

38,966 shares out of 18,604,442 is less than 1% of the total outstanding shares. So AirTran has a long way to go to say the least.

mlsrar · Fri Feb 02, 2007 11:28 am

620 WTMJ was reporting that only 1% of the stockholders had shown interest in the deal at the current prices, FWIW.

AlexPorter · Fri Feb 02, 2007 11:39 am

Quoting Mainland (Reply 19):
38,966 shares out of 18,604,442 is less than 1% of the total outstanding shares. So AirTran has a long way to go to say the least.

AirTran is offering shareholders $13.25 per share. Well Midwest shares are going for $13.51 on the market at the moment. No wonder hardly anyone is tendering shares to airTran.*

*Assuming I understand the concept of "tendering" correctly.

[Edited 2007-02-02 03:40:33]

TVNWZ · Fri Feb 02, 2007 12:03 pm

Quoting Sideflare75 (Reply 18):
It is less than 1% of the outstanding shares of YX. Not good if that is all they can get but I'm sure that will change

And a lot or almost all of those shares are probably controlled by...Airtran.

ImperialEagle · Fri Feb 02, 2007 12:47 pm

Quoting DeltaDAWG (Reply 14):
I believe the urgency is to find a hub airport that they can grow that is not on the East coast and has plenty of gate space for incoming 737's. The fact that YX has some extra 717 lying around doesn't hurt either.

So what about a merger with AS? Too expensive?
If they are looking to obtain some sort of "critical mass" it would certainly give them a "West Coast" presence----and their pax would have access to some of the Pacific Rim carriers. (Just like their pax now have access to the European market from the "East Coast" at ATL and MCO, just to name a few.)

Oh well, IMO everyone should leave YX just the way it is.
I've been enjoying the chocolate chip cookies and extra leg-room for quite some time now(although severely limited by their small route system!) and don't want to see it dissapear! Big grin

deltadawg · Fri Feb 02, 2007 10:48 pm

Quoting ImperialEagle (Reply 23):
So what about a merger with AS? Too expensive?

Yes, too expensive and yet another carrier that would probably fight tooth and nail to stay independent.

One thing that keep thinking about is that everyone talks about the fact that the current offer of $13.25 per share is lower than the current trading value of MEH stock of aroune $13.50. If you look at the historical value of MEH stock it has never been this high. I believe you can attribute the rise in the stock to the proposed buyout only. If FL withdraws its tender I believe you will see the stock fall back to below $10 easily and then the shareholders are going to be screaming "Where's my value Tim?" "Where's AirTran, come back AirTran, please!"

Big version: Width: 368 Height: 299 File size: 5kb

TedEx · Fri Feb 02, 2007 10:53 pm

YX + AS could be very interesting... Especially if operated as seperate carriers with common ownership and a strong marketing / codeshare agreement.

I feel like these companies are quite similar and would do well to partner somehow but I'd like to see them operate as seperate companies with unique identites, HQs and workgroups maintained with the possible exception of IT, MX and finance.

mke717spotter · Fri Feb 02, 2007 11:04 pm

Nothing to big, but yesterday YX announced RSW is going year round from Seasonal and also some enhancement to SFO.

Mainland · Fri Feb 02, 2007 11:28 pm

Quoting DeltaDAWG (Reply 24):
One thing that keep thinking about is that everyone talks about the fact that the current offer of $13.25 per share is lower than the current trading value of MEH stock of aroune $13.50. If you look at the historical value of MEH stock it has never been this high.

Not true, MEH traded higher than $13.50 back in the late 90's.

deltadawg · Fri Feb 02, 2007 11:39 pm

Quoting Mainland (Reply 27):
Not true, MEH traded higher than $13.50 back in the late 90's.

Sorry, you are correct. I do remember the stock being upwards of $19-20 years and years ago. However, I also remember it plummeting down to around $3.50-$4.00.

But when the FL offer goes away, I still think it will sink down below $10.00.

Just an opinion.

sideflare75 · Fri Feb 02, 2007 11:41 pm

Quoting DeltaDAWG (Reply 24):
If you look at the historical value of MEH stock it has never been this high.

What?

As recently as 2002 this was a $20.00 stock and going back to 1998 to 2000 Midwest's stock was consistently over $30.00 and was even pushing $40.00.

You can't just look at last year.

deltadawg · Sat Feb 03, 2007 12:04 am

Quoting Sideflare75 (Reply 29):
You can't just look at last year.

I'm not, look back over the last five years.

Look, I am not bashing YX, I fly them to MKE and CWA appx. once per month. I enjoy the flights, I like the 2x2 seating and I would miss that compared to FL. However, I am just saying that YX's stock increase in the last 4-5 months is attributed to the tender from FL. That's all.

quickmover · Sat Feb 03, 2007 12:11 am

Quoting DeltaDAWG (Reply 30):
I enjoy the flights, I like the 2x2 seating and I would miss that compared to FL. However, I am just saying that YX's stock increase in the last 4-5 months is attributed to the tender from FL. That's all.

There's no doubt about that. If the offer was pulled, the price will retract some. I would also add that 2x2 seating on a 717 is nice, but 2x2 on those 15 or so crj200s coming is something else. Absolutely nothing to rave about at all. The crj70s are much nicer.

deltadawg · Sat Feb 03, 2007 12:38 am

Quoting Quickmover (Reply 31):
I would also add that 2x2 seating on a 717 is nice, but 2x2 on those 15 or so crj200s coming is something else. Absolutely nothing to rave about at all. The crj70s are much nicer.

This is a move I don't understand YX making. If they are touting the Signature Service so much to investors and in response to FL's offer, why push new CRJ service as a plus for expansion. If the majority of YX customers are used to paying a little more for the YX experience/comfort then why not step up to a E170/75/90 and get a truly comfortable 2x2 that could be configured with real Signature Service?

CRJ's are God's cruel joke to the airlines and it's customers. They are uncomfortable and the seats are too narrow. I like the fact that YX flew the FRJ's because they offered some reasonable level of comfort as compared to the CRJ's.

I still believe the expansion with CRJ's was only due to the oncoming FL offer. A reactionary decision, not proactive.

ImperialEagle · Sat Feb 03, 2007 1:10 am

Quoting DeltaDAWG (Reply 32):
CRJ's are God's cruel joke to the airlines and it's customers. They are uncomfortable and the seats are too narrow. I like the fact that YX flew the FRJ's because they offered some reasonable level of comfort as compared to the CRJ's.

You've got that right!
I refuse to book a flight on a CRJ and will just travel another day if they swap one out on me.
Every seasoned traveler I have met and discussed it with feels the same way------AVOID CRJ's at all cost!

I will even make connections---way out of my way to avoid them and will continue to do so------no loyalty to "the company" when it comes to those! mad

quickmover · Sat Feb 03, 2007 1:40 am

Quoting DeltaDAWG (Reply 32):
This is a move I don't understand YX making. If they are touting the Signature Service so much to investors and in response to FL's offer, why push new CRJ service as a plus for expansion. If the majority of YX customers are used to paying a little more for the YX experience/comfort then why not step up to a E170/75/90 and get a truly comfortable 2x2 that could be configured with real Signature Service?

CRJ's are God's cruel joke to the airlines and it's customers. They are uncomfortable and the seats are too narrow. I like the fact that YX flew the FRJ's because they offered some reasonable level of comfort as compared to the CRJ's.

Maybe the availability of crj200s, because other carriers are dropping them in favor of the 70 seaters, is the reason YX thinks they can make money with them. Perhaps Skywest made them a good deal on 50 seaters, because no one else wants them. Unfortunatley, you get what you pay for.

sideflare75 · Sat Feb 03, 2007 1:40 am

Quoting DeltaDAWG (Reply 30):
I'm not, look back over the last five years.

Look, I am not bashing YX, I fly them to MKE and CWA appx. once per month. I enjoy the flights, I like the 2x2 seating and I would miss that compared to FL. However, I am just saying that YX's stock increase in the last 4-5 months is attributed to the tender from FL. That's all.

I only said you can't look back over the last year because that is the chart you used as an example, and I know you are not bashing Midwest. But when you make a statement like the stock has never been this high well that is simply not true, that's all. 5 years ago today the price was over 18 and actually went up to 20 a couple of months later.

In December 05 this was a $4.00 stock. In December 06, before the first offer of 11.25 was announced to the public, it was $9.50. That's a pretty good gain before any of this takeover/merger was public knowledge. So I don't think you can attribute all of the gains in Midwests stock price to the takeover. Alot of that is due to the improved performance and profits.

JBo · Sat Feb 03, 2007 5:11 am

Quoting Quickmover (Reply 31):
but 2x2 on those 15 or so crj200s coming is something else. Absolutely nothing to rave about at all. The crj70s are much nicer.

That may be, but the CRJ-700 is far too large an aircraft for the type of regional operation YX maintains.

Quoting DeltaDAWG (Reply 32):
This is a move I don't understand YX making. If they are touting the Signature Service so much to investors and in response to FL's offer, why push new CRJ service as a plus for expansion. If the majority of YX customers are used to paying a little more for the YX experience/comfort then why not step up to a E170/75/90 and get a truly comfortable 2x2 that could be configured with real Signature Service?

Because YX is expanding their regional market as well as mainline. The CRJs are an expansion to the Midwest Connect brand to expand and add service to smaller communities by upgrading and expanding current FRJ routes, in turn allowing the FRJs to upgrade existing Beechcraft routes.

The E-series jets would not be as good of a fit on these routes and also too close in size to the 717 to be practical.

Quoting DeltaDAWG (Reply 32):
CRJ's are God's cruel joke to the airlines and it's customers. They are uncomfortable and the seats are too narrow. I like the fact that YX flew the FRJ's because they offered some reasonable level of comfort as compared to the CRJ's.

I still believe the expansion with CRJ's was only due to the oncoming FL offer. A reactionary decision, not proactive.

Completely untrue.

How could the CRJ expansion be reactionary when they've had the 50-seat proposal out long before the FL tender offer? YX had the RFP out nearly 1 year ago for 50-seat flying.

I don't think YX's decision was made so much on who had what aircraft as who offered the best service with the least conflict with other airline contracts.

Keep in mind that ExpressJet was also talked about as a potential contender for YX flying, but did not make it past the first cut due to the conflicts with the CO routes.

What I don't get is how all of you treat the CRJ expansion as a backward step. Any larger aircraft would be uneconomical for the type of operation YX has (70-seaters are not the answer for everything). Secondly, there obviously was not an ERJ operator who answered the RFP that offered a sufficient enough service to YX, hence the expansion with CRJs. Thirdly, many of the routes the CRJ will likely expand on can NOT be economically operated with a 717 ... however will likely replace the 717 on a few shorter mainline routes in order to allow the 717s to expand elsewhere.

The CRJ move is a step in the right direction. Why? Because expanding the regional feed into the hubs helps build the passenger base to expand the mainline flying out of the hub.

floridaflyboy · Sat Feb 03, 2007 5:29 am

Quoting DeltaDAWG (Reply 32):
I like the fact that YX flew the FRJ'

Did they get rid of the FRJ? I thought they were still operating.

JBo · Sat Feb 03, 2007 6:10 am

Quoting Floridaflyboy (Reply 37):
Did they get rid of the FRJ? I thought they were still operating.

The FRJs are still in the fleet and not going anywhere. We have a 12th aircraft coming online in March ... the FRJs are gradually supplanting existing Beech Routes and as the CRJs come online will likely further said practice.

Mainland · Sat Feb 03, 2007 7:09 am

Quoting TVNWZ (Reply 22):
And a lot or almost all of those shares are probably controlled by...Airtran.

New SEC filing out. AirTran only owns 200 shares of Midwest, and I'd presume they were part of the 38,966 tendered.

"Relationships With Midwest

As of the date of the offer, AirTran beneficially owns 200 shares of Midwest common stock, representing less than 1 percent of the outstanding shares of Midwest common stock. On January 10, 2007, two wholly-owned subsidiaries of AirTran each purchased 100 shares of Midwest common stock at $11.99 per share through ordinary brokerage transactions on the open market (all of which shares are owned beneficially and of record by such subsidiaries of AirTran). "

AirTran New York, LLC and Galena bought 100 each.

Edit: Galena info

[Edited 2007-02-02 23:18:18]

LASoctoberB6 · Sat Feb 03, 2007 7:35 am

i dont get it.......if an airline does not want to be taken over, then why cant they just say no?

sideflare75 · Sat Feb 03, 2007 7:51 am

Quoting LASOctoberB6 (Reply 40):
i dont get it.......if an airline does not want to be taken over, then why cant they just say no?

They can but as a publically traded company YX is really owned by the shareholders. If and when FL gets to a price that the shareholders demand a sale it will happen. Remember most people own the stock to make money. Midwest in and of itself means nothing to them.

TVNWZ · Sat Feb 03, 2007 9:43 am

Quoting DeltaDAWG (Reply 24):
One thing that keep thinking about is that everyone talks about the fact that the current offer of $13.25 per share is lower than the current trading value of MEH stock of aroune $13.50. If you look at the historical value of MEH stock it has never been this high. I believe you can attribute the rise in the stock to the proposed buyout only. If FL withdraws its tender I believe you will see the stock fall back to below $10 easily and then the shareholders are going to be screaming "Where's my value Tim?" "Where's AirTran, come back AirTran, please!"

Quoting DeltaDAWG (Reply 30):
I am just saying that YX's stock increase in the last 4-5 months is attributed to the tender from FL. That's all.

Probably not. You have to know who owns the airline and why. It is in friendly, local, big investor hands for this simple reason. The airline was founded on a niche service supported by these investors. They don't need a few extra million to show profit to anyone since the value of their holdings are so vast that Midwest's valuation is ..well...petty cash in the scheme of things.

The stock will fall back because airline stocks in general are valued way below their intrinsic value. Speculation drove it up, lack of speculation will drop it down.

Quoting Mainland (Reply 39):
New SEC filing out. AirTran only owns 200 shares of Midwest, and I'd presume they were part of the 38,966 tendered

You are missing their financial backers, institutional investors, bankers etc. who most assuredly bought the stock on the come. That's how they get Billion dollar bonuses.

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