AirTran, which had wanted to combine Midwest's hubs in Milwaukee and Kansas City with its presence on the East Coast, ended its dogged pursuit of Midwest, which began in October.

"We accept the Midwest board's decision," AirTran Chief Executive Joe Leonard said in a statement.

On Sunday, AirTran let a lower bid expire and said it would focus on a growth strategy that did not include Midwest. The carrier later revived its takeover plans with a higher bid on Tuesday.

During the 10 month saga, AirTran raised its bid for Midwest at least four times, ultimately reaching USD$16.25 a share, and succeeded in getting three nominees elected to Midwest's board of directors. But in the end, it was unwilling to match TPG's USD$17-a-share offer.

The winning bid, which includes a passive minority investment from Midwest partner Northwest Airlines, represents a nearly 16 percent premium to Midwest's closing share price of USD$14.70 on Thursday. TPG's previous offer was USD$16 a share.

The success of the TPG bid protects Northwest's dominance in upper Midwestern markets by slowing AirTran's expansion on those routes. TPG said it may eventually sell Midwest to Northwest or re-list it on the stock market.

One analyst said the failure of AirTran's bid may be a blessing for the airline.

"The potential revenue synergies could easily have disappeared if Northwest had decided to aggressively defend its turf -- something that looked increasingly likely," said Kevin Crissey, an analyst at UBS Investment Research, in a note.

The deal marks the end of a protracted and testy battle between AirTran and Midwest, which worked tirelessly to fend off its rival. AirTran's Leonard and Midwest CEO Timothy Hoeksema traded barbs for months over whether Midwest was better off as an independent carrier.

Midwest, a regional carrier is coming off a rough second quarter, when net profit tumbled 44 percent because of weak fares and high fuel expenses.

TPG partner Richard Schifter said he hopes the firm's airline industry experience, together with an expanded alliance with Northwest, will lead to a bigger and better Midwest.

TPG said it bought the carrier based on its stand-alone strategy rather than as part of a plan to merge it with another airline.

"We have no intention at this stage to explore further consolidation" in the US airline sector," Schifter said.

TPG has a history of investing in airlines, including approaches earlier this year in the European market.

Northwest had said that although it had no plans to participate in management or control of Midwest, it would continue a code-sharing agreement and could explore cost-reduction measures such as joint fuel purchasing.

AirTran, a low-cost carrier based in Orlando, and which operates a hub in Atlanta, said it was not looking for another merger partner and would continue its strategy of adding new markets and planes and offering low fares.

AirTran had earlier said Northwest's involvement in TPG's offer could raise antitrust concerns, but TPG said it did not expect to face any such hurdles.

Midwest said its sale to TPG is expected to close in the fourth quarter, subject to shareholder and regulatory approval. As part of the deal, Midwest agreed to pay a fee of USD$13.5 million if the deal collapses under certain circumstances.

(Reuters)