Midwest Air /AirTran Merger Update

As the next exchange offer expiration deadline for Midwest Air (MEH)/AirTran (AAI) approaches, the rhetoric from both sides has naturally increased over the last few days. MEH has again defended its stance against the proposed transaction, offering the very stale claims of "inadequate offer" and "opportunistic", while AAI has re-iterated its commitment to pursuing the combination. In what has become standard procedure, neither company has offered any new or compelling concepts to the current situation.

However, AAI's CEO's statement that "A lot is going to happen over the next few weeks," is somewhat of an understatement. MEH's June 14 annual shareholder meeting will undoubtedly spark an even more heated public debate on the merits, or lack thereof, of AAI's efforts. The only thing that will be worthy of focus is the percentage of MEH shares being tendered to AAI in this time frame. Currently, reports suggest that just more than 7% of MEH shares have been handed over to AAI.

This is expected to increase by mid-June.

It will again be repeated that this publication believes that AAI offer is not only adequate at the current level, it is also a rational, strategic proposal that will have long-term benefits for both companies. The term 'opportunistic' does not necessarily have to be a negative characterization, particularly in a situation such as this. Opportunity is precisely what AAI is offering to MEH -- for the long-term.

Despite MEH's continued defensive posture, we continue to anticipate that the companies will ultimately reach a friendly, formal merger agreement in the near future.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.