Contestants on the television game show "Deal Or No Deal" ultimately come to a point in the game when they must decide. Do they accept the offer on the table or do they reject the offer, play the game again and hope that the next offer will be even higher? If they reject the offer, they also risk losing what they have been offered.
And so it is with the shareholders, the board of directors and the officers of Midwest Air Group Inc., the Oak Creek-based parent company of Midwest Airlines.
AirTran Holdings Inc. is offering $13.25 per share, or $345 million, in a hostile bid to take over Midwest.
“Hostile” is a Wall Street term for unwanted and unsolicited overtures. Indeed.
Joseph Leonard, chairman and chief executive officer of AirTran may be a Southerner, but he was not exactly a gentleman on Thursday. In a conference call with analysts, he was sarcastic and highly critical of Midwest’s board of directors, using words such as "schizophrenic," "weak," "unrealistic" and "bizarre” to describe their business plan.
Actually, it was Leonard’s comparison of the two companies that was bizarre. Leonard criticized the Midwest board because the company has been "unprofitable." In reality, Midwest posted a profit of $1.7 million in its most recent quarter, and AirTran lost $4.3 million in its most recent quarter.
So far, Midwest’s officers and board members have been steadfast and unified in opposition to AirTran’s overtures.
Like the common shareholders, Midwest’s executives themselves are assuming risks.
Consider company president and chief executive officer Timothy Hoeksema. According to the most recent Securities & Exchange Commission (SEC) documents, Hoeksema owns 160,600 shares of Midwest stock. At $13.25 per share, Hoeksema stands to cash in his chips worth more than $2.1 million if he accepts AirTran’s latest offer. And that’s not even counting the many additional stock options he certainly has accrued.
Other Midwest insiders, their stock shares owned and the value of those shares with the latest AirTran offer, according to the SEC, include: director John Bergstrom, 16,014 shares ($212,186); director James Boris, 3,131 shares ($41,486); senior vice president Scott Dickson, 12,700 shares ($168,275); treasurer and director of investor relations Dennis O'Reilly, 11,450 shares ($151,713); director Ulice Payne Jr., 10,815 shares ($143,299); senior vice president David Reeve, 28,267 shares ($374,537); officer Curtis Sawyer, 12,900 shares ($170,925); director Samuel Skinner, 16,719 shares ($221,527); senior vice president, secretary and general counsel Carol Skornicka, 33,000 shares ($437,250); director Elizabeth Solberg, 11,693 shares ($154,932); director Richard Sonnentag, 30,049 shares ($398,149); senior vice president Christopher Stone, 24,734 shares ($327,726); director Frederick Stratton Jr., 59,746 shares ($791,634); director David Treitel, 31,490 shares ($41,724); and vice president Christopher White, 15,225 shares ($20,173). The totals do not include additional stock options.
Hoeksema, Bergstrom, Boris, Dickson, Payne, Reeve, Sawyer, Skinner, Skornicka, Solberg, Sonnentag, Stone, Stratton, Treitel and White are looking real smart right about now, as they acquired more Midwest stock shares over the past couple of years at bargain basement prices and held on to them. Ultimately, they will be rewarded for their faith in the company.
Indeed, Hoeksema had the foresight and the confidence in his company to build his stock portfolio at a time when the consensus on Wall Street was that the airline industry was doomed. Hoeksema boldly predicted at a Milwaukee Press Club Newsmaker Luncheon in November 2005 that his company would become profitable in 2006.
He was right.
And if the AirTran offer ultimately is accepted, a couple of folks will likely be second-guessing themselves. O'Reilly and former Midwest senior vice president James Rankin, who left the company last fall to become CEO of Air Wisconsin, each sold thousands of Midwest stock shares last year. O'Reilly sold 40,000 shares for $7.10 to $7.11 per share, and Rankin sold 35,000 shares for just $4.87 to $6.06 per share.
Had they held on, they could have doubled their money.
Open the case!
Steve Jagler is executive editor of BizTimes in Milwaukee and is past president of the Milwaukee Press Club. BizTimes provides news and operational insight for the owners and managers of privately held companies throughout southeastern Wisconsin.
Steve has won several journalism awards as a reporter, a columnist and an editor. He is a graduate of the University of Wisconsin-Milwaukee.
When he is not pursuing the news, Steve enjoys spending time with his wife, Kristi, and their two sons, Justin and James. Steve can be reached at steve.jagler@biztimes.com.
