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Editor: Brian JM Quinn
Boston College Law School

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Tuesday, July 31, 2007

Midwest Air Group Blinks

Midwest Air Group, Inc., parent of Midwest Airlines, announced today that it has formed a special committee to explore strategic and financial alternatives for the company.  According to the announcement:

While the board of directors has not changed its recommendation regarding the unsolicited exchange offer by AirTran Holdings, Inc., the committee intends to commence discussions with AirTran regarding its proposal to acquire all outstanding shares of Midwest. Additionally, the committee intends to hold discussions with other strategic and financial parties that have recently expressed interest in pursuing a transaction with Midwest.

Airtran's battle for Midwest has been one of the most vigorously fought takeover battles of this decade.  The formation of a special committee by Midwest is likely driven by increasing shareholder protest at their board's scorched earth resistance to Airtran's "hostile" bid.  Last week, hedge fund Octavian Management LLC, Midwest's largest shareholder with a 7.5% stake, called the Airtran bid "extremely compelling" and stated that it was "irresponsible and wrong for the company not to abide by its fiduciary responsibility to engage with AirTran" in negotiation.  The Midwest committee will therefore serve to cover the board's liability exposure, but it is also likely to lead to a serious exploration of the AirTrans offer.  If Airtran succeeds in acquiring Midwest it will be a powerful statement about the ability of any public company to "just say no" and resist a transaction, but it will also serve as a reminder of the immense transaction costs our current takeover system imposes by permitting the use of anti-takeover devices. 

http://lawprofessors.typepad.com/mergers/2007/07/midwest-air-gro.html

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