Mesaba Airlines Is Set To Climb Higher

When Northwest Airlines, the world's fourth-largest, offered in early November to buy the parent of regional carrier Mesaba Airlines, the shares of Mesaba Holdings (MAIR) soared from 10 to 13 5/8. Northwest already owns 28% of Mesaba, with two seats on its board. The regional carrier has formed a panel to study the offer. Mesaba has yet to accept or reject, and its stock is still hovering around 13.

Mesaba Airlines Is Set to Climb Higher

"But we expect Mesaba to reject the lowball $13-a-share offer soon and seek a higher price--from Northwest or elsewhere," says Sven Monberg, a special-situations analyst at Starr Securities. "The offer is cheap--about eight times the estimated March, 2001, earnings of $1.61 a share--compared with SkyWest Airlines' price-earnings ratio of 20 and Atlantic Coast's 28," he says. With Mesaba's earnings growth and regional routes to 103 cities in 27 states, industry experts estimate that Mesaba is worth $248 million to $262 million, or 17 to 18 a share, says Monberg. He thinks Northwest will raise its bid for Mesaba, which has a cash hoard of $112 million.

A possible white knight is Mesa Air Group: Soon after Northwest made its offer, Mesa sent a letter to Mesaba's board expressing interest in a "business combination" with Mesaba. Mesa already owns 3% of Mesaba. Northwest declined comment. Stay tuned.

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