UPDATE 2-TPC Group gets higher buyout offer from Innospec

* Potential offer at $44 to $46 per share in cash

* TPC says will consider the non-binding proposal

* Shares of TPC up 10.7 percent in premarket

(Adds background, stock)

Oct 8 (Reuters) - Chemicals maker TPC Group Inc onMonday said it received a buyout proposal from Innospec Inc

worth as much as $721 million, topping an offer fromtwo private equity firms made in August.

Private equity firms First Reserve Corp and SK CapitalPartners in August had offered $627.2 million to acquire TPC.

The deals pit the private equity industry's desire to expandinto a high-margin sector against a chemical industry veteran'sattempt to expand.

TPC's main product is butadiene, used to make syntheticrubber for tires and other automotive products. But weak demandhas pressured its business this year as prices for butadienehave fallen sharply, causing a trough in TPC's market.

Innospec, a specialty chemical maker, could offer $44 to $46per share in cash, TPC said in a statement on Monday.

First Reserve and SK Capital offered $40 a share in lateAugust.

Shares of TPC closed at $40.67 on the Nasdaq on Friday. Theshares have consistently traded above the $40 price offered bythe private equity firms, and at least two of TPC's top-10shareholders have said they will vote against the deal.

In premarket Monday trading, shares of TPC jumped 10.7percent to $45.01. Shares of Innospec were unchanged from theirFriday close at $34.35.

TPC said it will consider the non-binding proposal fromInnospec. It previously said a transaction with First Reserveand SK Capital Partners would be in the best interest ofshareholders.

Perella Weinberg Partners LP is advising TPC. Blackstone is providing equity financing forInnospec.

(Reporting by Ernest Scheyder in New York and Krishna N. Das inBangalore; Editing by Don Sebastian and Leslie Adler)