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The Southwest Airlines Co. (NYSE:LUV) Board of Directors today announced that it has approved the adoption of a limited-duration Shareholder rights plan ("Rights Plan"). The Rights Plan is effective immediately and will expire in one year. Any extension would be subject to prior approval by the Company's Shareholders.
The Board, in consultation with its advisors, adopted the Rights Plan in response to the public announcement by Elliott Investment Management L.P. (together with its affiliates, "Elliott") that it had accumulated a significant economic interest in Southwest Airlines common stock. In adopting the Rights Plan, the Board considered, among other things, that Elliott:
Gary Kelly, Executive Chairman of the Board, said, "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 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. Our Board and management team remain focused on restoring our industry-leading financial performance and building a sustainable and profitable future for the airline and its Shareholders. We are confident that we have the right strategy, the right plan, and the right team in place to succeed."
About the Rights Plan
The Rights Plan is similar to plans adopted by other publicly traded companies. It applies equally to all current and future Shareholders and is not intended to deter offers or preclude the Board from considering offers that are fair and otherwise in the best interests of the Company's Shareholders. The Rights Plan is designed to deter the acquisition of actual, de facto or negative control of Southwest Airlines by any person or group without appropriately compensating its Shareholders for that control.
Pursuant to the Rights Plan, the Company is issuing one right for each share of common stock. The rights will initially trade with Southwest Airlines common stock and will generally become exercisable only if any person or group acquires 12.5% or more of the Company's outstanding common stock (the "triggering percentage"). The Rights Plan does not aggregate the ownership of Shareholders "acting in concert" unless they have formed a group under applicable securities laws and does not limit any Shareholder's ability to conduct or otherwise support a solicitation in connection with a meeting of Shareholders. If the rights become exercisable, all holders of rights (other than the person or group triggering the Rights Plan, whose rights would become void) will be entitled to acquire shares of common stock at a 50% discount to the then-current market price or the Company may exchange each right held by such holders for one share of common stock.
Under the Rights Plan, any Shareholder that currently owns more than the triggering percentage may continue to own its shares of common stock, but the rights will become exercisable if such Shareholder subsequently increases its ownership by one or more shares. The Rights Plan does not contain any dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board of directors to redeem the rights.
Posted In: LUV
