Board Will Meet With All Parties Interested In Buyout

It appears persistence may soon pay off for AirTran Airways, as months of dogged pursuit of a merger appear to have finally worn down the board at Midwest Air Group, owner of Midwest Airlines.

Midwest indicated Tuesday it will consider AirTran's latest $389 million offer, and will soon form a committee of its board of directors to begin talks with AirTran, reports the Associated Press. That marks a 180-degree shift from the board's previous position the airline would function best as a separate entity.

Representatives with Midwest stressed those talks do not mean a buyout is imminent... but just try telling that to Wall Street. Shares in the regional airline took off Tuesday, climbing 11 percent on the news of a possible merger.

Curiously, the board also announced Midwest would open talks with other companies that have expressed interest in buying the airline... sending a signal to AirTran that it isn't the only bidder in the game.

The news was welcomed by Octavian Advisors, the largest single shareholder in Midwest, which has voiced its support for an AirTran/Midwest merger for some time.

"We think this is a big step forward for effectuating a transaction," said Richard Hurowitz, chief executive of the hedge fund.

As you would expect, AirTran CEO Joe Leonard also expressed optimism. "We look forward to working with them," he said.

Analyst Craig Kennison, with Robert W. Baird & Co., said the about-face by Midwest is a "clear signal the board has changed its view on the value of Midwest as an independent airline and sees more opportunity for shareholders and other constituents in a financial transaction."

FMI: www.airtran.com, www.midwest.com