By Brian E. Clark
During a lively webcast Tuesday afternoon with Midwest Airlines investors and analysts, hedge fund CEO Richard Hurowitz challenged Midwest chairman Tim Hoeksema to enter into negotiations with AirTran. New York-based Octavian Advisors, which Hurowitz runs, owns 6 percent of Midwest stock.
“Why are you reluctant to negotiate?” Hurowitz asked, noting that more than half – 56 percent – of the company’s shares have been pledged to AirTran, which is waging a hostile takeover effort.
But Hoeksema reiterated that AirTran’s latest offer of $13.25 per share is insufficient and does not reflect the value of Midwest and its evolving growth plan, which includes new planes, new seating and code sharing with Northwest and other airlines. He said improvements would add around $30 million annually to Midwest’s bottom line in coming years. See the Midwest release at http://www.wisbusiness.com/index.iml?Article=96902
The webcast was designed to detail Midwest’s strategies, but Hurowitz quickly brought the focus back to AirTran’s hostile takeover efforts and said he could not understand why Midwest leaders would not at least talk AirTran officials.
“Our board feels AirTran’s offer is less by a fair amount of Midwest’s value as show by our strategic plan, which tells a very good story,” said Hoeksema. “Moreover, they are a competitor and it would be appropriate to talk to them at this point.”
Frustrated, but still polite, Hurowitz asked – with a hint of sarcasm – “Are you trying to save the shareholders from themselves? We believe your growth ideas are not mutually exclusive of a merger.”
Hoeksema could come under even more pressure to talk with AirTran after June 14, when Midwest holds its annual shareholders meeting. Three positions on the nine member board are up for election and AirTran has proposed a slate of three pro-merger candidates.
Hurowitz’ sentiments are nothing new. In a April filing with the federal Securities and Exchange Commission filing, Octavian said it was “extremely disappointed by the board of directors’ decision to reject the latest offer from AirTran without engaging in a meaningful dialogue.”
And in a letter to Hoeksema, Hurowitz wrote> “We continue to believe that a strategic combination of Midwest and AirTran is extremely compelling and that, in light of AirTran’s materially increased offer, both sides should now come together for good faith negotiations.
“We believe that most shareholders share our view and once again urge you and your board to immediately enter into constructive talks with AirTran.”
Octavian bought 1.46 million shares of Midwest Air earlier this year at prices ranging from $11.46 to $14.69, according to the SEC. Midwest stock closed Monday at $15.07, down from a 52-week high of $15.74.