Midwest, TPG Close Deal

Last Thursday’s closing of the sale of Midwest Air Group, Inc., parent company of Midwest Airlines, to Midwest Air Partners, LLC, an affiliate of TPG Capital, is the start of a new era for "The best care in the air," according to Timothy E. Hoeksema, chairman and chief executive officer since...

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Last Thursday’s closing of the sale of Midwest Air Group, Inc., parent company of Midwest Airlines, to Midwest Air Partners, LLC, an affiliate of TPG Capital, is the start of a new era for "The best care in the air," according to Timothy E. Hoeksema, chairman and chief executive officer since the airline took to the skies in 1984. The acquisition by TPG will preserve Midwest as Milwaukee's hometown airline and the Midwest. Trading of Midwest Air Group stock on the American Stock Exchange concluded as of the close of trading on January 31.
The deal paved the way for Northwest Airlines Corp. to buy a minority stake in Milwaukee-based carrier in a deal valued at $452 million. Midwest shareholders will receive $17 per share. Northwest will then have a 47 percent stake in the carrier, while TPG Capital retains the balance. Midwest already code shares with the Minneapolis-based network carrier. Midwest will work with Northwest Airlines – a passive, minority investor in the new ownership structure – to enhance its existing partnership and to achieve cost synergies in areas such as aviation insurance and fuel purchases.
Northwest, itself, is currently in negotiations with Delta on a possible merger. When it was first announced, Delta indicated it wanted a quick conclusion to negotiations in order to present the deal to its board in early February. Related Story
However, negotiations stalled on where the merged carrier would be headquartered and the role of senior staff. In addition, the Minnesota, Tennessee and Michigan congressional delegations – which include House Aviation Subcommittee Chair James Oberstar – have become involved with Oberstar declaring he was against such a merger. Northwest has hubs in Detroit and Memphis.

Midwest & TPG
The closing was the final step in avoiding the hostile takeover proposed by AirTran last year, after the Department of Justice cleared the way for Midwest Air Group, Inc. to be acquired by Midwest Air Partners, LLC, an affiliate of TPG Capital.
"We're looking forward to capitalizing on TPG's considerable experience in the airline industry to help us continue to meet – and exceed – the expectations of the traveling public," said Hoeksema. TPG's 15-year record of investing in the aviation industry includes Continental Airlines, America West, Ryanair, Hotwire.com, Gate Gourmet, and Sabre.
Hoeksema said Midwest would benefit from TPG's strength and expertise as the airline executes its comprehensive strategic plan. In 2008, that includes the implementation of seating choice throughout the airline's mainline fleet; growth and enhancement of its existing code-share agreement with Northwest Airlines; and the introduction of a wide-ranging environmental initiative that the airline has named "The best care for the air."(sm)
The environmental initiative will build on the TPG companies' environmental stewardship and Midwest's track record of environmentally conscious decision-making. Over the last five years, Midwest has reduced its carbon emissions rate more than 20 percent through fuel-conservation efforts. As part of the initiative, Midwest will partner with Boulder, Colo.-based Sustainable Travel International to offer travelers environmentally responsible travel planning choices -- including a carbon-offset program.
"We at TPG are very enthusiastic about the future of Midwest,” said Richard P. Schifter, partner, TPG Capital. “We see significant value in Midwest's rich legacy as a leading provider of customer-oriented air service – and that's why we are investing in Midwest. Our goal is to work with Midwest's excellent management team and loyal workforce to look for opportunities to grow and enhance service for customers in the greater Milwaukee and Kansas City metropolitan areas and throughout the airline's network."
The airline will celebrate "A Dozen Thanks Day" on Tuesday, February 12. Midwest employees will hand out the airline's popular chocolate chip cookies at Milwaukee's General Mitchell International Airport and Kansas City International Airport. Members of the airline's Midwest Miles program who fly that day will receive 1,200 bonus miles. And customers who receive the airline's weekly fare special e-mails will receive a code that entitles them to a 12 percent discount on tickets purchased that day.
As previously announced, the transaction was approved at a special meeting of Midwest shareholders on October 30, 2007. The move comes after the airline announced it was turning its Skyways Airlines operation into an airport services firm in favor of having SkyWest Airlines take over its entire Midwest Connection service. Related Story