What would it take for the Midwest Air Group Inc. board of directors to accept a buyout offer from AirTran Holdings Inc.?
Aside from a much higher price tag than the original $290 million offer, what could sweeten the deal and convince Midwest chief executive officer Timothy Hoeksema and his board to embrace the overture?
Here is an idea, albeit a completely hypothetical one.
Before we go forward, let's go back about six years. Firstar Corp. of Milwaukee set out to acquire Minneapolis-based U.S. Bancorp. When the negotiations bogged down on price, Firstar upped the ante by agreeing to move the merged company's corporate headquarters to Minneapolis and adopt U.S. Bank's name.
Of course, the community of Milwaukee was royally violated by the move, but such is life in the world of publicly traded companies.
This time around, with Midwest Air Group and AirTran, the roles are reversed. The Milwaukee company is the hunted, and the out-of-state company is the hunter.
If you ask Midwest Air Group's board, its employees and its loyal Milwaukee customers about this hostile takeover attempt, they'll tell that they have two key objections: (1) They don't want the hometown airline's headquarters to be moved out of state; and (2) They don't like AirTran's discount business model, which would cheapen or even destroy Midwest's brand as the "Best Care in the Air."
AirTran chief executive officer Joseph Leonard attempted to appease some of the discomfort by offering to continue to provide Midwest's customary freshly baked chocolate chip cookies on the flights.
Nice try, pal, but it's going to take more than cookies. A lot more.
As a condition of the deal, what if -- and admittedly, it's a big "what if" -- AirTran agreed to move the merged company's headquarters from Orlando, Fla., to Oak Creek? And what if AirTran agreed to adopt the Midwest Airlines name? After all, the Midwest Airlines brand has more value than the AirTran name, which many people continue to equate with ValuJet, the troubled airline that was acquired by AirTran after one of its thrifty airplanes crashed into the Florida Everglades in 1996.
Such gestures would keep the headquarters -- and the jobs -- here and would add value to the merged company. After all, AirTran would receive an upgraded name and brand.
Carol Skornicka, senior vice president of corporate affairs, secretary and general counsel at Midwest Air Group, said the notions of moving the headquarters to Milwaukee and adopting the Midwest name have not been discussed by the companies.
Tad Hutcheson, vice president of marketing and sales for AirTran, told SBT that such offers have not been made, and he's not expecting any such concessions to be pending.
Still, Hutcheson reiterated his company's determination to acquire Midwest Air Group. AirTran has ordered 60 new 737 airplanes from Boeing Co.
"We've got those airplanes on order, and they've got to go somewhere," Hutcheson said.
Furthermore, Hutcheson said, AirTran doesn't believe Midwest's business model of providing exceptional customer service, i.e. two-across leather seating, is sustainable.
"We don't think that that business model works anymore," Hutcheson said. "Everything changed after 9-11."
That point is debatable. After some scary and lean years, Midwest Air Group's turnaround took flight, and the company was actually $1.8 million in the black through the first nine months of this year.
It could be that the corporate cultures of the two companies just won't mesh, no matter the price.
However, that culture clash alone won't necessarily keep Midwest Air Group in town or independent. Another suitor could come calling, just like R.R. Donnelley & Sons Co. swooped in on Oct. 31 to acquire Menasha-based Banta Corp. after Banta's board had rejected a hostile takeover bid by Cenveo Inc.
Take note: Eagan, Minn.-based Northwest Airlines Corp. has hired Evercore Partners Inc., an investment-banking firm, to explore "broad strategic alternatives in the airline industry," including the possibilities of a merger or acquisition.
I'd bet they would offer more than cookies.
Aside from a much higher price tag than the original $290 million offer, what could sweeten the deal and convince Midwest chief executive officer Timothy Hoeksema and his board to embrace the overture?
Here is an idea, albeit a completely hypothetical one.
Before we go forward, let's go back about six years. Firstar Corp. of Milwaukee set out to acquire Minneapolis-based U.S. Bancorp. When the negotiations bogged down on price, Firstar upped the ante by agreeing to move the merged company's corporate headquarters to Minneapolis and adopt U.S. Bank's name.
Of course, the community of Milwaukee was royally violated by the move, but such is life in the world of publicly traded companies.
This time around, with Midwest Air Group and AirTran, the roles are reversed. The Milwaukee company is the hunted, and the out-of-state company is the hunter.
If you ask Midwest Air Group's board, its employees and its loyal Milwaukee customers about this hostile takeover attempt, they'll tell that they have two key objections: (1) They don't want the hometown airline's headquarters to be moved out of state; and (2) They don't like AirTran's discount business model, which would cheapen or even destroy Midwest's brand as the "Best Care in the Air."
AirTran chief executive officer Joseph Leonard attempted to appease some of the discomfort by offering to continue to provide Midwest's customary freshly baked chocolate chip cookies on the flights.
Nice try, pal, but it's going to take more than cookies. A lot more.
As a condition of the deal, what if -- and admittedly, it's a big "what if" -- AirTran agreed to move the merged company's headquarters from Orlando, Fla., to Oak Creek? And what if AirTran agreed to adopt the Midwest Airlines name? After all, the Midwest Airlines brand has more value than the AirTran name, which many people continue to equate with ValuJet, the troubled airline that was acquired by AirTran after one of its thrifty airplanes crashed into the Florida Everglades in 1996.
Such gestures would keep the headquarters -- and the jobs -- here and would add value to the merged company. After all, AirTran would receive an upgraded name and brand.
Carol Skornicka, senior vice president of corporate affairs, secretary and general counsel at Midwest Air Group, said the notions of moving the headquarters to Milwaukee and adopting the Midwest name have not been discussed by the companies.
Tad Hutcheson, vice president of marketing and sales for AirTran, told SBT that such offers have not been made, and he's not expecting any such concessions to be pending.
Still, Hutcheson reiterated his company's determination to acquire Midwest Air Group. AirTran has ordered 60 new 737 airplanes from Boeing Co.
"We've got those airplanes on order, and they've got to go somewhere," Hutcheson said.
Furthermore, Hutcheson said, AirTran doesn't believe Midwest's business model of providing exceptional customer service, i.e. two-across leather seating, is sustainable.
"We don't think that that business model works anymore," Hutcheson said. "Everything changed after 9-11."
That point is debatable. After some scary and lean years, Midwest Air Group's turnaround took flight, and the company was actually $1.8 million in the black through the first nine months of this year.
It could be that the corporate cultures of the two companies just won't mesh, no matter the price.
However, that culture clash alone won't necessarily keep Midwest Air Group in town or independent. Another suitor could come calling, just like R.R. Donnelley & Sons Co. swooped in on Oct. 31 to acquire Menasha-based Banta Corp. after Banta's board had rejected a hostile takeover bid by Cenveo Inc.
Take note: Eagan, Minn.-based Northwest Airlines Corp. has hired Evercore Partners Inc., an investment-banking firm, to explore "broad strategic alternatives in the airline industry," including the possibilities of a merger or acquisition.
I'd bet they would offer more than cookies.
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.
