The board of
Midwest Air Group
told investors they should reject the most recent acquisition offer from
, saying it continues to undervalue the company.
Earlier this month, AirTran made its third bid, worth $15 in cash and stock for each share of Midwest. The latest proposal was for $389 million at the time, but is now valued a bit higher because of an increase in AirTran's stock price.
"Our board determined that AirTran's revised offer does not take into account the long-term value of our strategic plan," said Midwest Chairman and CEO Timothy Hoeksema. "The board believes that Midwest's future holds great promise and that the best interests of all stakeholders lies in Midwest continuing to execute its plan."
At the same time though, Midwest provided a disappointing forecast. While solidly ahead of the same period in 2006, first-quarter revenue was slightly below internal targets. Still, the company expects to report a profitable quarter, when calculated using generally accepted accounting principles.
However, Midwest believes it will post a loss on an adjusted basis that will be a bit wider than last year's quarter. Therefore, full-year earnings, before items, will probably be $1.30 to $1.50 a share.
AirTran CEO Joe Leonard issued a statement excoriating Midwest's management, saying among other things that the fact that his company's newest takeover bid was turned down "flies in the face of good corporate governance and is clearly irresponsible, demonstrating that the
Midwest board is derelict in its fiduciary duty to the Midwest shareholders."
He also said his company was "disappointed, but unfortunately not surprised." At any rate, AirTran pledged to move forward with its exchange offer for Midwest and to keep up its effort to place three nominees on its board.
Shares of Midwest were down 2.2% at $14.30. AirTran was losing 0.6% at $11.49.