A Southwest Airlines jet sits parked at Ellison Onizuka Kona International Airport at Kehole waiting for passengers on January 20, 2024 in Kailua-Kona, Hawaii.
Kevin Carter | Getty Images
Southwest Airlines announced on Wednesday that it had adopted a shareholder rights plan, commonly known as the “poison pill,” in response to activist Elliott Management Investments within the airline and pushed for the ouster of CEO Bob Jordan and chairman Gary Kelly.
The poison pill would only kick in if Elliott—or another investor—acquired at least 12.5% of the company. If that threshold was exceeded, all other shareholders would be entitled to buy one new Southwest share for each share they currently own at a 50% discount.
Southwest said the move was taken in part because Elliott filed paperwork with antitrust regulators allowing the activist to buy back a larger stake.
“Southwest Airlines has made a good faith effort to work constructively with Elliott Investment Management since our initial investment and remains open to any ideas that create long-term value,” Kelly said in a statement. Elliott and Southwest management met in person just two weeks ago, according to people familiar with the matter.
Such a provision would reduce Elliott’s influence and voting power. Companies often adopt shareholder rights plans to counter the threat of an activist; car rental companies Hertz adopted a poison pill 2013 to respond to “unusual” trading activity that management said signaled an activist.
Bank of America and Morgan Stanley are Southwest’s bankers. Vinson & Elkins and Kirkland & Ellis, two law firms with highly regarded activist defense practices, are Southwest’s attorneys.
Elliott did not immediately respond to a request for comment.
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