Elliott, Southwest to meet in September as firm lays out case for change
Recasts lead paragraph, adds information on investor day in paragraph 4 and updates share price in paragraph 10
By Svea Herbst-Bayliss
NEW YORK, Aug 26 (Reuters) -Elliott Investment Management and Southwest Airlines LUV.N will meet early next month for the first time to discuss potential changes at the airline, both companies said on Monday, but the hedge fund told investors it may still press ahead with a proxy fight.
The activist hedge fund, which now holds voting power over roughly 9.7% of Southwest Airlines LUV.N, said it is eager to meet with company representatives on Sept. 9 to discuss ways to tackle the carrier's "immense" challenges.
The company said it is prepared to meet with Elliott on Sept. 9 and has gathered feedback in the last several months and met with many shareholders directly.
"We welcome the opportunity to discuss ideas that would drive sustained Shareholder value as we work to reach a collaborative resolution," Southwest said in a statement. The company will also hold an investor day on Sept 26.
Elliott told its investors in a letter that the company needs new outside leadership for a "better future," and that it could call a special shareholder meeting to vote for newboard directors. If Southwest leaders cannot identify "what is best for Southwest" and its stakeholders, the hedge fund will push ahead with its board challenge, the letter said.
The hedge fund also dialed up the pressure on the airline by proposing a new board-level committee that would conduct a thorough business review and "drive transformational change."
An investor would need to own 10% of Southwest's stock to call a special shareholder meeting, and Elliott is very close to that point now, having increased its stake from 8% previously.
TURNAROUND PLAN
Elliott has been pushing to refresh the board and oust top executives to help improve the carrier's performance. In June, CEO Bob Jordan said Southwest has a "great plan," which management will execute," and that he had no plans to resign.
The airline has been trying to implement a turnaround plan, including adding seats with more leg room, moving to assigned seats and naming a new board member in July. Its stock price, which has been under pressure, pared losses recently.
Southwest's stock closed largely unchanged at $28.20.
Earlier this month, Elliott laid out plans to nominate 10 director candidates to Southwest's 15-person board, including former Virgin America CEO David Cush and Robert Milton, the former CEO of Air Canada.
In the letter, Elliott said why it wants so many board seats. The hedge fund does not want to be "in charge" but said the board is "purpose-built to serve the interests" of CEO Robert Jordan and his predecessor and current executive chairman Gary Kelly. Elliott has pushed for Jordan and Kelly to be replaced since its stake in the airline became public in June.
As a public company, Elliott wrote, Southwest must be accountable to shareholders and is not "an absolute monarchy."
Some investors share Elliott's frustration, the letter said, noting that Artisan Partners publicly called for leadership change and urged the board to work with Elliott. Other shareholders expressed concerns privately to the hedge fund, it wrote.
The hedge fund also pointed to concerns among Southwest pilots who have called for bold leadership to fix corporate problems.
The airline must find a comprehensive solution, "not just some hand-picked new directors beholden to current management and a few long-overdue initiatives," the letter said.
While CEO Jordan recently wrote that the fight with Elliott is "a battle for the heart of our company," the hedge fund said it is a fight for Jordan and Kelly to "continue to control Southwest, on their terms, for as long as they wish."
Reporting by Svea Herbst-Bayliss; Editing by Muralikumar Anantharaman and Aurora Ellis
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
