ATLANTA -- A solid and growing majority of Midwest Airlines shareholders support AirTran's hostile bid for the Milwaukee-based carrier.
Owners of about 60 percent of Midwest shares back AirTran's $15-a-share, $389 million buyout offer, AirTran officials said yesterday as they extended a tender offer until Aug. 10.
Excluding Midwest managers and directors, 64.1 percent of shareholders back the deal.
Those numbers are up from 57 percent on May 18, the last time AirTran extended its offer.
The two sides are headed toward a telling proxy fight at Midwest's annual meeting Thursday. AirTran has nominated a slate of three candidates for election to Midwest's nine-member board. If elected, the AirTran-backed directors are widely expected to pursue a merger.
"Based on the support we have heard from Midwest shareholders and other observers, they want a new set of eyes and a fresh, independent voice inside the Midwest boardroom so that the AirTran offer can get a full and fair hearing," said AirTran Chief Executive Officer Joseph B. Leonard. "We are dismayed that the Midwest board continues to ignore shareholders' calls for the company to explore the merits of the AirTran offer."
AirTran is seeking a hub outside Atlanta, where two-thirds of its flights originate.
Midwest is particularly desirable for AirTran because both airlines fly Boeing 717s, and their route networks have little overlap. AirTran sought a Chicago hub in 2004 but was outbid by rival Southwest.
Midwest has rejected AirTran's overtures since 2005 and insists Midwest's stand-alone plan promises better returns and a higher-quality product.
Midwest recently announced an alliance with Northwest Airlines, and they have expanded to small markets through regional partner SkyWest.
The carrier known for on-board chocolate chip cookies also plans to drop its all-business-class seating arrangement in favor of a mix of business and economy seating.
Carol Skornicka, Midwest's general counsel, said AirTran isn't gaining much traction among Midwest shareholders.
"Frankly, we were surprised it was such a small, incremental increase," she said. "They barely moved the needle. This isn't a popularity contest. It's about value, and we're holding our own convincing our shareholders of the value of our plan going forward."
Wisconsin law gives Midwest powerful anti-takeover defenses that the company can use to block hostile bids. AirTran has asked Midwest to set aside such "poison pills," but Midwest has refused.
Also, ownership in Midwest has shifted substantially since AirTran announced its hostile bid in December. Hedge funds and institutional investors now own the majority of Midwest shares instead of the private individuals who bought stakes in the company when it went public in 1995.
Some of the new buyers such as hedge funds Octavian and Litespeed have been publicly urging Midwest managers to begin merger talks. So have some unlikely proponents such as CtW Investment Group, a New York firm that advises union-sponsored pension funds.
"It's a fact of life that transactions are magnets for short-term investors," said Michael Garland, a CtW spokesman.