Story posted on Dealscape: http://dealscape.thedealblogs.com/20..._bumpy_ski.php

Midwest Air Group Inc.’s effort to stave off a hostile $389 million takeover offer from rival AirTran Holdings Inc. was dealt a potential blow Thursday when hometown (and believed to be sympathetic) shareholder Heartland Advisors Inc. disclosed it has halved its stake in the Oak Creek, Wis.-based airline.

Heartland in a filing Thursday with the Securities and Exchange Commission said it now owns 592,100 shares of Midwest, or 2.4% of the float, down from 1.2 million, or 4.99%, at year’s end.

The investor gave no reason for the sale, but it could not come at a worse time for Midwest. AirTran has nominated a slate of directors to be considered at Midwest’s June 14 annual meeting, and it has asked shareholders to tender their shares in favor of a deal by May 16 in order to force management into talks. Midwest’s reluctance to engage in talks has enraged some shareholders including Octavian Advisors LP, owner of 5.97% of Midwest shares.

Though Heartland has offered no public comment on the proposed deal, Midwest advocates have insisted to reporters that the airline’s local owners would beat back any effort to force it into a deal. If nothing else, a source supporting AirTran’s effort said Thursday, the sale means shares once held by a long-term backer of Midwest are now most likely in the hands of new holders more interested in turning a quick profit — meaning Midwest’s challenge just grew that much more difficult.

Looks like things are turning in AirTran's favor with this latest development. Heartland decided to sell half of their stake in Midwest rather than tender their shares to AirTran.