Eagan, Minn.-based Northwest will provide $213 million, or
47%, of the total merger consideration, according to a preliminary proxy
statement filing. The airline had not previously disclosed the amount, saying
only that it is a “passive investor” in the consortium that trumped a hostile
bid by AirTran aimed at making Midwest’s Milwaukee base its second major hub.
It will take great restraint by Northwest to remain truly
passive with so much capital on the line. Indeed, the size of the stake is
likely to add credibility to those who believe Northwest could acquire full
control of Midwest in the years to come when TPG looks to exit its investment.
The filing also sheds new light into the behind-the-scenes
discussions that led up to the merger. AirTran launched its hostile bid last
December, but it made no inroads with Midwest’s directors until it won three
board seats in June. Soon after that election, according to the filing,
Midwest CEO Tim Hoeksema contacted his counterpart at Northwest, Doug
Steenland, to discuss a transaction.
Hoeksema brought TPG into the conversation in mid-July. On
Aug. 2 Steenland told Hoeksema that Northwest was not interested in acquiring
control of Midwest, but would be interested in a minority investment.
Northwest and TPG were put in touch with each other soon after.
The filing comes just a day after U.S. Sen. Herb Kohl sent a
letter
urging
the Department of Justice to expedite its review of the deal. Though
Northwest’s large stake could raise eyebrows, few believe the deal will be
stopped by regulators. Indeed, AirTran seemingly has moved on. The airline on
Aug. 29
announced
plans to boost its operations in Milwaukee, going head to head with Midwest.
—Lou Whiteman
See
TheDeal story on TPG's deal for Midwest
See
Midwest's proxy statement
See
Sen. Kohl's statement
See
Dealscape post on AirTran ramping up operations in Milwaukee
See
m&a,
Northwest Airlines
Northwest Airlines Corp. was seen as eager to keep discounter
AirTran Holdings Inc. out of its backyard when it decided to invest in TPG’s
$451.8 million white-knight
