Southwest Airlines has adopted a shareholders rights plan following its approval from the board of directors on July 2, 2024. The poison pill was deployed to defend against activist investor Elliott Investment Management bought a $1.9bn stake in Southwest, representing an approximate 11% interest in the airline.
The limited-duration shareholder rights plan will be triggered if an entity is or becomes the beneficial owner of 12.5% or more of the company's outstanding common stock without the prior approval of the board. Any rights held by this entity ""will be null and void and may not be exercised"", the airline explained in a stock filing.
""In light of the potential for Elliott to significantly increase its position in Southwest Airlines, the board determined that adopting the rights plan is prudent to fulfil its fiduciary duties to all shareholders,"" said Southwest's executive chairman of the board Gary Kelly. ""Southwest Airlines has made a good faith effort to engage constructively with Elliott Investment Management since its initial investment and remains open to any ideas for lasting value creation.""
The rights plan is effective immediately and will expire in one year; any extension to the plan will require prior approval from its shareholders.
In adopting the rights plan, the board said it had considered Elliott's stake in the airline, as well as the fact it had not reported ""its full purported position in Southwest Airlines"" on any filings with the US Securities and Exchange Commission (SEC). In addition, it had also considered Elliott submitting filings with US antitrust authorities that would allow it to acquire a ""significantly greater percentage"" of the airline's voting power across two of its funds as early as July 11, 2024.
Southwest deploys poison pill against activist investor
