Friday, August 17, 2007
Midwest Air Group yesterday announced that it had agreed to be acquired by an affiliate of TPG Capital, L.P. for $17 per share in cash in a transaction valued at approximately $450 million. The Midwest board unanimously selected this offer over Airtran's cash and stock offer valued at $16.23 at the time of the board decision. For those keeping track, on December 12, 2006, the last trading day before the public announcement of AirTran's interest in acquiring Midwest, Midwest's stock was trading at $9.08.
As I noted before,
[T]he Midwest board still has leeway to prefer the TPG offer. The Midwest board is governed by Wisconsin law, not Delaware and therefore the typical Revlon duties do not apply. In fact, the duties of a board under Wisconsin law in these circumstances have never been fully elaborated. . . . And even if Revlon duties did apply, the Midwest board could make the reasonable judgment that AirTran stock was likely to trade lower in the future, and therefore Airtran's offer was not a higher one than TPG's all-cash bid.
Ultimately, the Midwest board relied upon the the current state of the markets and the uncertainty with AirTran's financing to justify its decision to go with TPG. Given the higher current value of TPG's bid this was wholly justifiable and probably the right one. Cash is once again king, at least until this morning's Fed rate cut. It is only Midwest's previous scorched earth policy vis-a-vis TPG which makes the decision suspect.
Still some questions remain. What is the scope of Northwest's role in the TPG deal and what are the antitrust provisions in the merger agreement? What happens if shareholders vote down the deal: has Midwest agreed to a break fee payable to TPG? And, what arrangements have been made for the current executive officers of Midwest? What is the break fee in the unlikely event AirTran decides to keep bidding? Once the agreements are filed, I'll post more.