The measure would dilute activist investor Elliott Management's 11% stake if the company acquires too many more shares
The battle to control Southwest Airlines just got a little trickier. The company announced Wednesday that it’s adopting a so-called “poison pill” defense in its bid to fend off hedge fund Elliott Management. The provision, outlined as part of a newly unveiled “shareholder rights plan,” would expand the number of Southwest shares outstanding and dilute Elliott’s sizeable stake if the fund tries to acquire a bigger percentage of the company.
“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 fulfill its fiduciary duties to all Shareholders,” Southwest board chairman Gary Kelly said in a statement, adding that the board is “confident that we have the right strategy, the right plan, and the right team in place to succeed.”
Elliott announced last month that it had acquired an 11% stake in Southwest with plans to turn around the carrier’s recent downward trajectory with a “comprehensive business review.” The company’s new poison pill awards every shareholder except Elliott the chance to double their holdings for half price if Elliott acquires 12.5% or more of the company.
Southwest shares were flat in early Wednesday trading and are down 1% for the year.
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