Midwest Air Group, Inc. (AMEX:MEH) said it has received an unsolicited takeover bid from AirTran Holdings (NYSE:AAI) today for $11.25 per Midwest share in cash and and stock, in a deal worth $290 million. The bid was first discussed back in October when AirTran Chairman and Chief Executive Joe Leonard sent a letter to Midwest executives stating that he was interested in such a transaction. On December 6th, the company issued a response to this letter stating that the offer would not be in the best interest of shareholders. The communications were made public today in an 8-K filing by AAI, sending the stock up over 20% to settle at around $11 per share. AirTran said that it went public with the offer in part because of Midwest's "extensive" defenses and opposition to the proposal.

Would the deal make sense? Well, a combined company would have pro forma revenue of about $3 billion in 2007 and 1,036 daily departures with 173 unique markets between 74 cities across the U.S., according to AirTran. Furthermore, they said that a deal could be completed by the end of the first quarter of 2007 and would add to earnings by the end of the first full year following the close. This makes it a very tempting target for AirTran, who said that they could offer more if they were able to conduct due diligence. The airlines have also been on fire recently: This is the second hostile bid in the airline industry in recent weeks, after U.S. Airways offered $8.5 billion in cash-and-stock to acquire Delta Air Lines. And there is also continued speculation surrounding Northwest Airlines and Continental Airlines, who are rumored to be considering M&A themselves. Combined, these factors make MEH a stock to watch closely during the coming months.

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Northwest Airlines (NWACQ)
Continental Airlines (CAL)
Delta Airlines (DARLQ)