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Shareholders of Midwest Air Group Inc. approved the airline’s $450 million buyout on Tuesday, clearing a key hurdle in its bid to go private.
Midwest said in a statement that shareholders approved an agreement that calls for a consortium led by TPG and including Northwest Airlines Corp. to pay $17 per share in cash for each share of Midwest. The deal was struck in August after Midwest spent more than six months fighting hostile overtures by rival AirTran Airways Inc. Despite the approval, shares of Midwest traded at just $16.16 on Tuesday afternoon, a discount of nearly 5% to the takeout price. The margin is attributable to lingering concern that regulators could block the takeover, fearful that Northwest, which is the second-largest carrier in Midwest’s home Milwaukee market and a dominant player in the region, will take too strong of a role in Midwest. Northwest has insisted its investment is passive, but the company will own more than 40% of Midwest post-deal. Rumors continue to swirl that the deal grants Northwest the eventual option to buy out TPG, putting Midwest fully under its control. Most believe the deal will eventually pass regulatory muster, but perhaps not by year’s end as TPG and Midwest hope. Any delay could be costly, as Midwest is coming under increasing pressure from one-time suitor AirTran in its Milwaukee market. AirTran announced in late August plans to fly from Milwaukee to Phoenix as well as boost flights to Ft. Myers and Tampa, Fla. The move gives the airline, which also flies from Milwaukee to Atlanta, Orlando, Fla., Baltimore and Las Vegas, a sizable and growing presence in Milwaukee. More trouble could be on the horizon. AirTran during its third-quarter earnings conference call Tuesday revealed that it has acquired additional operating slots at New York’s LaGuardia and Washington’s Reagan National Airport from ATA Airlines Inc. Though AirTran is most likely to use at least some of the slots to supplement its existing service at those airports, flights from those markets to Milwaukee are among Midwest's most lucrative. Should AirTran use some of those slots to open new service to Milwaukee, it could squeeze Midwest’s profits right as its new private equity owners are taking over. — Lou Whiteman
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