Southwest Airlines Co has adopted a shareholder rights strategy, commonly known as a “poison pill,” in a bid to prevent activist hedge fund firm Elliott Investment Management from increasing its stake in the business, according to a statement released by the US carrier.
Elliot, which was founded by Paul Singer and is one of the world’s largest activist investors, is aiming to remove the airline’s current CEO Bob Jordan and Chairman Gary Kelly, according to reports.
In June, Elliott disclosed that it owns approximately 11% of Southwest Airlines and has been critical of the airline’s performance relative to its peers.
The poison pill, which will be triggered if an investor such as Elliott acquires a 12.5% stake, allows all other shareholders to purchase additional shares at a 50% discount for each share they currently hold.
Following the announcement, Southwest’s stock rose by 1% during Wednesday trading. The decision to implement the poison pill was partly driven by Elliott’s filings with antitrust authorities, which would permit it to acquire a larger stake in the airline. It appears Elliott made these filings simultaneously with its stake announcement.
In a statement, Southwest’s Kelly stated: “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.”
Jordan meanwhile has stated that he has no plans to resign from his position.
