Midwest Airlines takeover: AirTran out, Northwest in

After months of pursuing a hostile takeover of Midwest Airlines, AirTran Holdings – the parent of AirTran Airways – gave up over the weekend. AirTran said its negotiations with Midwest have ended, and its tender offer for Midwest shares has expired. The AirTran effort did force Midwest’s board to consider other strategic options, and Midwest said its board has voted unanimously to pursue an offer from TPG Capital to acquire all its shares for $16 each in cash. AirTran had offered $15.75 in cash and its own stock. TPG Capital was formerly known as the Texas Pacific Group, a private equity firm with a long history of airline acquisitions. And TPG isn’t the only party involved in the offer: Northwest Airlines confirmed media speculation that it is a “passive investor” in the TPG Capital bid for Midwest. Northwest said it is providing “financing to facilitate the transaction,” but insisted that if the bid is successful, it “will not participate in the management or control of Midwest…The previously announced codeshare agreement between NWA and Midwest Airlines will remain in place and the two airlines will explore cost reduction activities such as joint fuel purchasing.” The Wall Street Journal said Northwest wanted to protect its marketing pact with Midwest, which could be at risk if AirTran acquired it; and that Northwest was anxious to prevent the aggressive, low-cost AirTran from making significant inroads into the upper Midwest, the heart of Northwest’s market.