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The board of directors at Southwest Airlines (NYSE:LUV) announced on Wednesday that it has approved the adoption of a limited-duration shareholder rights plan. The rights plan will be triggered if an entity holds a 12.5% economic interest in the company. In addition, the company highlighted that the rights plan is effective immediately and will expire in one year.
The rights plan was adopted in response to the public announcement by Elliott Investment Management that it had accumulated an economic interest in Southwest Airlines (LUV) of approximately 11%. However, it was noted that Elliott has not reported its full purported position in Southwest Airlines on any filings with 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.
The rights plan 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 shareholders. Instead, the right plan is designed to deter the acquisition of actual, de facto, or negative control of Southwest Airlines (LUV) by any person or group without appropriately compensating shareholders for that control.
“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,” stated Southwest Airlines (LUV) Board Chairman Gary Kelly.
“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.”
Shares of Southwest Airlines (LUV) tracked 0.55% higher in premarket trading.