UPDATE 2-AirTran raises Midwest bid to $16.25 per share

(Adds details, background, AirTran COO comment)

By Kyle Peterson

CHICAGO Aug 14 (Reuters) - AirTran Holdings Inc. AAI.N on Tuesday raised its offer to buy Midwest Air Group Inc. MEH.A by 3 percent to about $445 million in a last-ditch bid to win control of the rival airline after a major Midwest shareholder objected to a proposed buyout led by private equity firm TPG Capital.

The increase to $16.25 per share from $15.75 marked the fourth time AirTran has raised its offer in its eight-month pursuit for Midwest in the face of strong resistance from Midwest's management.

Midwest, which has rejected previous offers from AirTran, said in a statement it would take the revised offer under consideration. The AirTran bid tops a $16-per-share bid from TPG.

AirTran said it raised its offer at the request of Midwest shareholders.

"They believe our deal is superior," AirTran Chief Operating Officer Bob Fornaro told Reuters.

On Sunday, AirTran said it had let its bid expire. Midwest later said it had accepted a buyout offer from TPG Capital, backed by Northwest Airlines Corp. NWA.N.

Midwest has said repeatedly that it has more value as a stand-alone airline. An AirTran takeover would absorb Midwest into the company.