AirTran bids again for Midwest Air

— -- Atlanta-based AirTran is offering $10 in cash and AirTran stock worth $6.25 for every share of Milwaukee-based Midwest. AirTran values its offer at $445 million.

On Sunday, AirTran dropped out of the bidding for Midwest, which it started in December. It pulled out rather than try to outbid Fort Worth-based TPG, the takeover firm headed by David Bonderman. Previously known as Texas Pacific Group, TPG has invested in several airlines since it took over a then-bankrupt Continental Airlines in the early 1990s.

Before Sunday, AirTran was offering $9.50 a share plus just over half a share of AirTran stock for each Midwest share to be bought. It then made a supposedly final cash-and-stock offer worth $15.50 per Midwest share, or about $431 million, that was beaten by TPG's all-cash offer worth $400 million.

AirTran President Bob Fornaro said his carrier dropped out of the bidding at that point because, "We didn't want to be a stalking horse for some other bidder." But late Tuesday, just after stock trading ended on Wall Street, AirTran jumped back into the battle with its $16.25-a-share offer.

Fornaro said AirTran officials studied the TPG/Northwest offer and plans, and heard from Midwest shareholders, employees and some people in the Milwaukee community. Those people, he said, fear a TPG/Northwest takeover will mean service reductions at Milwaukee, lost jobs and reduced economic activity for Milwaukee, and higher travel prices for consumers.

Earlier Tuesday, Pequot Capital, Midwest's largest shareholder, with almost 9% of the carrier's stock, said in a filing with the Securities and Exchange Commission that it wasn't convinced the TPG/Northwest $16-a-share bid was better than AirTran's Sunday offer of $15.75.

"We believe there is significantly more upside in AirTran's cash-and-stock offer than a nominally higher all-cash deal," said Pequot managing director Steve Pigott in a letter to Midwest that was part of the filing.