Board Acts in Response to a Significant
Accumulation by Elliott Investment Management
Protects Value of All Shareholders'
Investments in Southwest Airlines
DALLAS,
July 3,
2024 /PRNewswire/ -- 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:
- Announced that it had built an approximately 11% economic
interest in Southwest Airlines;
- Has not reported its full purported position in Southwest
Airlines on any filings with the U.S. Securities and Exchange
Commission (the "SEC"); and
- Has made regulatory filings with U.S. antitrust authorities
that would provide it the flexibility to acquire a significantly
greater percentage of Southwest Airlines' voting power across two
of its funds starting as early as July 11,
2024.
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.
Further details about the Rights Plan are contained in a Form
8-K filed today by the Company with the Securities and Exchange
Commission.
Bank of America Securities, Inc. and Morgan Stanley & Co.
LLC are acting as financial advisors to Southwest Airlines and
Vinson & Elkins L.L.P. and Kirkland & Ellis LLP are acting
as legal advisors.
Cautionary Statement Regarding Forward-Looking
Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Specific forward-looking statements include, without limitation,
statements related to (i) the Company's focus areas, including with
respect to restoring its industry-leading financial performance and
building a sustainable and profitable future for the airline and
its Shareholders; and (ii) the Company's expectations regarding its
opportunities, strategies, initiatives, financial performance, and
outlook, including with respect to having the right strategy, the
right plan, and the right team in place to succeed. These
forward-looking statements are based on the Company's current
estimates, intentions, beliefs, expectations, goals, strategies,
and projections for the future and are not guarantees of future
performance. Forward-looking statements involve risks,
uncertainties, assumptions, and other factors that are difficult to
predict and that could cause actual results to vary materially from
those expressed in or indicated by them. Factors include, among
others, (i) the impact of fears or actual outbreaks of diseases,
extreme or severe weather and natural disasters, actions of
competitors (including, without limitation, pricing, scheduling,
capacity, and network decisions, and consolidation and alliance
activities), consumer perception, economic conditions, banking
conditions, fears or actual acts of terrorism or war,
sociodemographic trends, and other factors beyond the Company's
control, on consumer behavior and the Company's results of
operations and business decisions, plans, strategies, and results;
(ii) the Company's ability to timely and effectively implement,
transition, operate, and maintain the necessary information
technology systems and infrastructure to support its operations and
initiatives, including with respect to revenue management; (iii)
the cost and effects of the actions of activist shareholders; (iv)
the Company's ability to obtain and maintain adequate
infrastructure and equipment to support its operations and
initiatives; (v) the impact of fuel price changes, fuel price
volatility, volatility of commodities used by the Company for
hedging jet fuel, and any changes to the Company's fuel hedging
strategies and positions, on the Company's business plans and
results of operations; (vi) the Company's dependence on The Boeing
Company ("Boeing") and Boeing suppliers with respect to the
Company's aircraft deliveries, fleet and capacity plans,
operations, maintenance, strategies, and goals; (vii) the Company's
dependence on Boeing and the Federal Aviation Administration with
respect to the certification of the Boeing MAX 7 aircraft; (viii)
the Company's dependence on other third parties, in particular with
respect to its technology plans, its plans and expectations related
to revenue management, operational reliability, fuel supply,
maintenance, Global Distribution Systems, and the impact on the
Company's operations and results of operations of any third party
delays or non-performance; (ix) the Company's ability to timely and
effectively prioritize its initiatives and focus areas and related
expenditures; (x) the impact of labor matters on the Company's
business decisions, plans, strategies, and results; (xi) the impact
of governmental regulations and other governmental actions on the
Company's business plans, results, and operations; (xii) the
Company's dependence on its workforce, including its ability to
employ and retain sufficient numbers of qualified Employees with
appropriate skills and expertise to effectively and efficiently
maintain its operations and execute the Company's plans,
strategies, and initiatives; (xiii) the emergence of additional
costs or effects associated with the cancelled flights in
December 2022, including litigation,
government investigation and actions, and internal actions; and
(xiv) other factors, as described in the Company's filings with the
Securities and Exchange Commission, including the detailed factors
discussed under the heading "Risk Factors" in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2023.
About Southwest Airlines Co.
Southwest Airlines Co. operates one of the world's
most admired and awarded airlines, offering its one-of-a-kind value
and Hospitality at 121 airports1 across 11
countries. Southwest took flight in 1971 to democratize the sky
through friendly, reliable, and low-cost air travel and now carries
more air travelers flying nonstop within the United States than any other
airline2. Based in Dallas and famous for an Employee-first
corporate Culture, Southwest maintains an unprecedented record of
no involuntary furloughs or layoffs in its history. By empowering
its more than 74,0003 People to deliver
unparalleled Hospitality, the maverick airline cherishes a
passionate loyalty among more than 137 million Customers carried in
2023. That formula for success has brought industry-leading
prosperity and 47 consecutive years4 of
profitability for Southwest Shareholders (NYSE: LUV).
Southwest leverages a unique legacy and mission to serve
communities around the world including harnessing the power of its
People and Purpose to put communities at the Heart of its success.
Learn more by visiting Southwest.com/citizenship. As the
airline with Heart, Southwest has set a goal to work toward
achieving net zero carbon emissions by 20505.
Southwest has also set near-term targets and a three-pillar
strategy to achieve its environmental goals. Learn more by visiting
Southwest.com/planet.
1 Effective Aug. 5,
2024, the airline will serve 117 airports.
2 Based on U.S. Dept. of Transportation
quarterly Airline Origin & Destination Survey since Q1
2021
3 Fulltime-equivalent active
Employees
4 1973-2019 annual
profitability
5 Southwest's net zero by 2050 goal
includes Scope 1, Scope 2, and Scope 3 Category 3 emissions only
and excludes any emissions associated with non-fuel products and
services, such as inflight service items.
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SOURCE Southwest Airlines Co.