Midwest Airlines merger deal could allow acquisition by Northwest

Northwest Airlines has been describing its partnership role in the planned purchase of Midwest Airlines by TPG Capital as that of a “passive investor.” But news emerged late last week that the agreement could give Northwest the opportunity to buy Midwest at some point if TPG decides it wants to divest its new acquisition. TPG officials played down that possibility, noting that the private equity firm normally holds onto its acquisitions for years, and that even if it did decide to sell, it has other options besides a sale to Northwest. Midwest Airlines’ parent company last week signed a definitive merger agreement with a newly created affiliate of TPG, which has a long history of airline investments. Northwest Airlines will be “a minority passive investor” in the company set up to make the acquisition, called Midwest Air Partners LLC, Midwest said, and will take no role in the day-to-day management of the airline. The deal still must pass muster with government antitrust regulators.


The agreement effectively puts an end to AirTran Airways’Airways’ months-long effort to acquire Midwest through a hostile tender offer. Midwest’s board and management had always opposed the AirTran bid, and had sought out other suitors. As a result, TPG came into the fray and outbid AirTran with an offer of $16 per share in cash for Midwest’s stock. AirTran countered last week with a bid of $16.25 in cash and stock, so Midwest’s board set a deadline of noon Thursday (August 16) for each party to make its “best and final offer.” TPG came in with a winning proposal of $17 a share, all in cash. In announcing the outcome, TPG Capital partner Richard Schiffer praised Midwest Airlines for maintaining “a quality of service to its passengers rarely seen today…We hope that our industry experience, together with an expanded alliance with Northwest Airlines, will lead to a bigger and better Midwest.” The deal will permit Midwest to keep its independence, its name, its Milwaukee base – and its chocolate chip cookies, said CEO Tim Hoeksema.