=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2007/08/17/financial/= f110203D03.DTL --------------------------------------------------------------------- Friday, August 17, 2007 (AP) Northwest Could End Up With Midwest By EMILY FREDRIX, AP Business Writer (08-17) 20:17 PDT MILWAUKEE (AP) -- Northwest Airlines Corp. could end up owning rival Midwest Air Group Inc= ., which has agreed to a $450 million buyout offer from private equity firm TPG Capital. Northwest is a passive investor in the deal and may eventually buy Midwe= st outright, TPG partner Richard P. Schifter said in a conference call Friday morning. The equity firm may want to cash out of the deal some day, he said, and Minneapolis-based Northwest could become the sole owner. Schifter said such a move could be several years away. Midwest's decision to sell to TPG came late Thursday night and ended months of back-and-forth with another rival, AirTran Holdings Inc. Midwest said TPG will pay $17 per share cash, worth about $450 million based on Midwest's 26.6 million shares outstanding. Orlando, Fla.-based AirTran's hostile takeover attempt of Midwest stretched back two years to an initial bid of $78 million in June 2005. Its last offer, a cash-and-stock deal, was worth about $16.04 a share, or $427 million. AirTran Chairman and CEO Joe Leonard said Friday in a statement that he had hoped to reach a consensual agreement with Midwest but added, "we accept the Midwest board's decision." AirTran shares rose 22 cents, or 2.2 percent, to close at $10.19 on Friday, while Midwest shares ended up 85 cents, or 5.8 percent, at $15.55 after rising to a 52-week high of $16 earlier in trading. Northwest shares rose 18 cents to $16.16. Northwest approached TPG about joining in a buyout of Midwest, Schifter said. "We concluded there was a combination that would make sense and began in earnest frankly just a few weeks ago," he said. Northwest is a minority investor in the deal, said Schifter, who would n= ot disclose the airline's level of involvement. Northwest spokesman Darren Shannon declined to comment. The deal is subject to antitrust approval. Midwest Chairman and Chief Executive Timothy E. Hoeksema has said the company worked with lawyers to ensure it would pass. He said they would begin discussions with federal officials in the next two weeks. Northwest has said it would not participate in Midwest's management shou= ld the TPG deal go through. Northwest accounts for about 18 percent of the traffic at Milwaukee's Mitchell International Airport and is the second-largest carrier behind Midwest. More than half of the flights leaving from Milwaukee are Midwest. TPG Capital, formerly Texas Pacific Group, has invested in other airline= s, including Continental, America West and Ryanair. Schifter said it would have many options if it eventually wanted to sell its stake in Midwest, including selling it back into the public market. The firm typically holds investments for several years so a deal, including a sale to Northwest, would most likely be years in the making, Schifter said. It took more than 11 years for TPG to sell its stake in America West, he said. "It frankly will depend upon circumstances somewhat beyond our control in how the airline performs and how the industry evolves," Schifter said. Hoeksema said Midwest was pleased with the transaction but did not comme= nt specifically on Northwest's involvement. "I think our shareholder base feels this is a very good outcome and that we worked diligently to pick the offer that had the best value and the most certainty," said Hoeksema, who expects the deal to close in the fourth quarter. It will need shareholder and regulatory approval, both of which are like= ly but not certain, Robert W. Baird analyst Craig Kennison wrote in an investors note Friday. Some people who own both AirTran and Midwest stock may vote against the transaction "to rekindle merger discussions," he wrote. But breakup fees, such as the $13.5 million Midwest would have to pay to terminate the deal, could discourage opposition, he said. Regulators also could be concerned about Northwest's involvement, althou= gh Kennison doubted they would block the deal. "We believe the political will is behind an independent Midwest, which boosts the odds of approval," he wrote. Midwest had pledged to remain independent, and TPG deal will allow it to keep its own name and management. AirTran had said it would merge Midwest under the AirTran name. Hoeksema and Schifter said Midwest and Northwest could combine some purchases, such as fuel, to save money. Richard Hurowitz, chief executive of one of Midwest's largest shareholders, Octavian Advisors, said he was glad of the outcome and TPG's involvement. "They're the most sophisticated airlines investors in the world," he sai= d. ___ On the Net: Midwest: Northwest: AirTran: www.midwestairlines.com www.nwa.com/ www.airtran.com --------------------------------------------------------= -------------- Copyright 2007 AP <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> If you wish to unsubscribe from the AIRLINE List, please send an E-mail to: "listserv@xxxxxxxxxxxxxxxxx". Within the body of the text, only write the following:"SIGNOFF AIRLINE".