Southwest Airlines introduced the “poison pill” after activist investor Elliott Investment Management bought a large stake in the airline.
The airline said Wednesday that the shareholder rights plan is effective immediately and will expire in one year, with any extension requiring prior approval from Southwest shareholders.
Shareholder rights plans, or “poison pills,” allow existing shareholders to buy stock at a discount in order to thwart a takeover by an outside company. Southwest’s plan is triggered when shareholders acquire more than 12.5% of the common stock, allowing all other shareholders to buy stock at a 50% discount.
Southwest said it introduced the rights plan due to several concerns, including Elliott’s roughly 11% stake in the company and the flexibility it has to gain a significantly larger percentage of Southwest’s voting power through two funds it owns as early as July 11.
“Given the potential for Elliott to significantly increase its ownership stake in Southwest Airlines, the board determined that it would be prudent to adopt a rights plan in order to fulfill its fiduciary responsibilities to all stockholders,” Southwest Chairman Gary Kelly said in a statement. “Since its initial investment, Southwest has made good faith efforts to negotiate constructively with Elliott Investment Management and remains open to all ideas for durable value creation.”
Last month, Elliott announced a $1.9 billion Stake Southwest Airlines tried to fire its CEO, but the company said it was in administration. Financial issues.
In a letter to Southwest’s board of directors, Elliott said Southwest’s stock price has fallen more than 50 percent over the past three years. He also criticized the airline for failing to evolve, hurting its ability to compete with other airlines. Elliott, who is based in Dallas, said: Massive flight cancellations The company is set to go ahead with the law in December 2022, citing what it says are outdated software and operational processes.
Elliott is seeking “substantial” changes to the board, including recruiting external executives to replace Robert Jordan and Kelly, and making new independent directors with experience at other airlines.
Southwest said it remains confident in Jordan, its management team and its ability to create long-term value for shareholders. Jordan He has no plans to resign and says management is due to present a plan to turn the airline around in September.
Southwest Airlines shares were up 11 cents to $28.41 in midday trading. The airline’s shares have fallen about 21% over the past year, while the benchmark S&P 500 index has risen about 25% in the same period.
