(Bloomberg) — Elliott Investment Management has called a special shareholder meeting for Southwest Airlines Co., Ltd., marking the official start of the airline’s first U.S. proxy fight since 2017.
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Activists called for a meeting on Dec. 10 so that fellow investors could vote on a number of new director candidates, according to a statement Monday confirming an earlier report by Bloomberg News.
Elliott has appointed eight directors to Southwest’s board of directors, with the aim of replacing an equal number of current directors. Candidates include Michael Corley, former deputy chief executive of Ryanair Holdings. David Kush, former CEO of Virgin America. Greg Saretzky, former CEO of WestJet.
“The candidate we are recommending today is uniquely qualified to hold the company’s executives accountable and ensure the company’s results are improved,” Elliott said in a statement.
In response, Southwest said in a statement late Monday that its board is committed to reaching a constructive resolution with Elliott, including providing a settlement framework for the appointment of up to three of Elliott’s nominees. He replied that he had made every effort. Elliott’s request for a special meeting was unnecessary and inappropriate.
“The timing of Elliott’s apparent request for control of the board, as it approaches one of the busiest travel seasons of the year, presents the greatest impediment to Southwest Airlines’ ongoing implementation of significant business transformation. “It appears that this was intended to be,” the airline said.
Southwest shares fell 0.8% to $30.37 in New York trading on Monday, giving the company a market value of about $18 billion. Elliott acquired an 11% stake in the company.
Mr. Elliott, led by Paul Singer, is one of the world’s busiest and most influential board agitators, but he rarely takes issues to shareholder votes, preferring instead to seek resolutions with target companies. .
Southwest is the first time since Elliott founded the activist group in 1977 that it has requested an extra-periodic shareholder meeting, or special meeting. This is also the first major U.S. proxy fight since 2017, when he nominated a director for engineering group Arconic Corp. Elliott and Arconic ultimately reached a settlement before the vote.
southwest tussle
In June, Mr. Elliott disclosed a roughly $2 billion stake in Southwest. The airline called for changes in strategy and leadership after years of poor performance, placing the blame squarely on CEO Bob Jordan and chairman Gary Kelly.
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Dallas-based Southwest’s stock has fallen about 40% over the past three years. At Monday’s close, the company’s stock price is up about 20% over the past year, but it still lags the performance of its peers. Delta Air Lines and United Airlines Holdings have both risen more than 50% over the period.
After the meeting with Mr. Elliott, Southwest announced in September that six board members and Mr. Kelly would resign. The number of board members has also been reduced from 15 to 12. Prior to the board reduction, Elliott said he would nominate 10 candidates. The activist subsequently reduced the number of director candidates to reflect the reduction in board size.
Other candidates Mr. Elliott has named to Southwest Airlines’ board of directors include: Sarah Feinberg, a former senior Department of Transportation official; Josh Gotbaum, longtime advisor to businesses and labor organizations; Dave Grissen, former group president of Marriott International; Robert Milton, former CEO of Air Canada. said Patty Watson, Chief Information Technology Officer at NCR Atleos.
“We are taking this action today because the need for improved oversight at Southwest Airlines has never been more urgent,” Elliott said in a statement.
poison
In July, Southwest employed a so-called poison pill strategy to protect itself from Elliott, saying at the time that it made a good faith effort to engage with activists.
In September, Southwest Airlines announced stock buybacks and detailed the end of its free seating policy. That same month, the company also laid out a comprehensive plan aimed at increasing operating profit by $4 billion by 2027. Jordan said the plan was in the works long before Elliott announced its investment. Mr. Jordan described Mr. Elliott’s campaign as “tactics and gamesmanship” and said a proxy fight is bad for the company.
In a letter to fellow Southwest shareholders in August, Mr. Elliott said he wanted to avoid the turmoil of a proxy fight. At the time, the company said, “Southwest is a storied American company and deserves the best possible stewardship by its board of directors.”
Asset management firm Artisan Partners Limited Partnership, which has pursued an activist-style approach in the past, also invested in Southwest.
–With assistance from Mary Schlangenstein and Katherine Burton.
(Updates Southwest Airlines statement starting in paragraph 5. An earlier version of this article corrected Southwest Airlines’ announced number of boarding flight departures.)
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