AirTran Sweetens Midwest Offer Again

Discount airline company AirTran Holdings is expected to announce another sweetening of its hostile bid for Midwest Air Group, this time to $15 per share. The bid will consist of $9 in cash and .582 shares of AirTran for each Midwest share. AirTran's new offer, which is 13% above its last one, values Midwest at $389 million. The new bid constitutes an 83% premium above Midwest's average closing price prior to AirTran's original bid last October. Midwest's shareholders will vote on the offer at a meeting on May 23, at which time AirTran will also propose three new directors. Midwest's current directors have resisted AirTran's attempts to take over the company, but they are under new pressure from the Octavian Master Fund, which holds a 5% stake in Midwest. In a letter sent last week to Midwest's executives, Octavian CEO Richard Hurowitz said Octavian "would strongly encourage and expect the board and management team of Midwest to ... immediately enter into good faith negotiations" if AirTran increased its bid. Midwest shares closed up 1.8% to $13.51 on Friday; AirTran gained $0.07 to close at $10.27.

Sources: Wall Street Journal, New York Times
Commentary: Midwest Air: Octavian Would Support Higher Offer From AirTran • In Direct Plea To Shareholders, AirTran Ups Bid For Midwest
Stocks/ETFs to watch: AirTran Holdings, Inc. (AAI), Midwest Air Group, Inc. (MEH). Competitors: Southwest Airlines Co. (LUV), UAL Corp. (UAUA), Northwest Airlines Corp. (NWACQ.PK). ETFs: iShares Dow Jones Transportation Index ETF (IYT)

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