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Midwest Shares Jump on Talks with AirTran, Others

Midwest Air Group said Tuesday it planned to begin talks with would-be acquirer AirTran Holdings and other interested parties, leading to a 13 percent jump in its shares.

For months, Midwest -- a budget airline based in Milwaukee -- steadfastly opposed a hostile offer by AirTran, saying it had more value if it remained independent. But its resistance weakened last month, when shareholders elected three board members nominated by AirTran.

Midwest said in a statement on Tuesday that while it had not changed its recommendation that shareholders reject the bid, it planned to start talks with AirTran , which has offered $15 a share, or about $367 million in cash and stock.

Midwest said its nine-member board had formed a committee to explore strategic and financial alternatives. That committee planned to hold discussions AirTran and other parties that have recently expressed interest in the company.

The five-member committee includes Jeffrey Erickson, who was nominated by AirTran to serve on Midwest's board.

By entering into talks with AirTran and others, "the board is pursuing a process to evaluate whether greater value can be delivered to shareholders through a near-term transaction," Samuel Skinner, the committee's chair, said in a statement.

"We are pleased that Midwest has taken the step to form a special committee, and we look forward to working with the committee," AirTran Chief Executive Joe Leonard said in a statement.

Midwest cautioned that there is no assurance that the process will result in a transaction with AirTran or any other party. The company did not name any of the other parties and did not give a deadline for a recommendation by the committee.

Midwest, which posted lower second-quarter earnings last week, has faced increasing pressure from its shareholders.

Last week, hedge fund Octavian Global Partners, the largest institutional holder in Midwest, said the airline's board should open talks with AirTran.

Midwest shares were up $1.65, or 13.1 percent, at $14.26 on the American Stock Exchange. AirTran rose 20 cents, or 2 percent, to $10.12 on the New York Stock Exchange.