TPG wins Midwest with sweetened $450m bid

US regional airline Midwest has accepted a $450 million bid from TPG, the firm’s second offer following a bid from discount airline AirTran.

TPG Capital will buy Midwest Air Group in a deal worth approximately $450 million (€334 million). The private equity firm’s $17 per share, cash offer was its second, made to counter a bid from longtime hostile bidder AirTran Holdings.

On Monday, the US airline said it planned to accept TPG’s first offer of $16 per share in cash, rather than an existing offer from discount airline AirTran of $15.75 per share in cash and stock. AirTran then upped its bid to $16.25 per share in cash and stock, prompting Midwest to ask both bidders to submit their “best and final offer” by noon on 16 August. TPG’s higher, all cash offer, which was roughly $50 million more than its initial bid, was found more favourable than AirTran’s final offer of $16.27 in cash and stock.

Midwest chairman and chief executive Timothy Hoeksema said in a statement that a merger with TPG will preserve “the airline’s iconic status as Milwaukee’s hometown airline and the popular Midwest Airlines brand”. Midwest spokesperson Carol Skornicka said earlier in the week that the airline favored TPG’s bid over AirTran’s because the latter “refused to treat our employees the way we thought they should be treated” because the AirTran proposal would have cut certain employee benefits.

The deal was unanimously approved by Midwest’s board of directors, and is expected to close in the fourth quarter. Northwest Airlines, with whom Midwest has a co-chair agreement allowing passengers to fly on both airlines in the course of a single trip, will be a minority passive investor in the deal.

TPG has invested in several other airlines including Continental Airlines, America West Airlines and Ryanair. TPG generated an IRR of 70 percent on its investment in Continental, which it bought with Air Canada in 1993 after Continental had gone through two bankruptcies.

The firm is currently formalising a €3.4 billion bid for Spanish airline Iberia, after gaining access to the airline’s books in mid-July.