Southwest Airlines adopts 'poison pill' after Elliott pushes for changes
Updates with shares in paragraph 10
July 3 (Reuters) -Southwest Airlines LUV.N adopted a so-called "poison pill" to deter Elliott Investment Management from raising its stake in the carrier after the activist investor called for leadership changes following disappointing financial results.
The announcement comes days after Southwest CEO Bob Jordan said he would not resign in response to pressure from Elliott, which revealed a stake worth nearly $2 billion in the carrier last month.
"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," Southwest Executive Chair Gary Kelly said in a statement on Wednesday.
Kelly said Southwest's board adopted the poison pill as Elliott could "significantly increase" its current stake of 11%.
Under the "poison pill" strategy, used by corporate boards to thwart hostile takeover bids, Southwest will issue one right for each share of common stock. The rights will initially trade with the carrier's common stock and will generally become exercisable if any person or group acquires 12.5% or more of the company's shares.
The right will allow holders to buy shares of common stock at a substantial discount.
Elliott's push for replacing CEO Jordan with an outside hire came after the carrier delivered lackluster results in recent quarters, partly because of delays in plane supply from Boeing BA.N.
Late in June, the company also flagged ongoing struggles with pricing in its second quarter due to difficulties in accurately predicting travel demand, inviting criticism from Elliott.
Elliott was not immediately available for comment on Wednesday.
Shares of the company were up less than 1% in early trade. The stock has lostnearly 22% of its valuein the past 12 months.
Reporting by Abhijith Ganapavaram and Ananta Agarwal in Bengaluru; Editing by Devika Syamnath
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