Elliott Requests Special Meeting at Southwest Airlines

Elliott Investment Management has informed Southwest Airlines Co. that it’s requesting a special shareholder meeting, according to people with knowledge of the matter, officially kicking off the activist investor’s first US proxy fight since 2017.

(Bloomberg) — Elliott Investment Management has informed Southwest Airlines Co. that it’s requesting a special shareholder meeting, according to people with knowledge of the matter, officially kicking off the activist investor’s first US proxy fight since 2017.

The activist investor nominated eight directors to the Southwest board and is seeking to replace the same number of board members, said the people, asking not to be identified discussing private information. Elliott has requested that the meeting take place Dec. 10, the people said. 

The notice is Elliott’s first for a special meeting, as well as its first proxy battle since 2017, when it nominated directors to the board at engineering group Arconic Corp. Elliott and Arconic eventually reached a settlement before the vote.

A representative for Southwest didn’t immediately provide comment. A spokesperson for Elliott declined to comment. 

After meeting with Elliott, Southwest announced in September that six of its board members including Chair Gary Kelly would depart. It also shrunk the board to 12 members from 15, a series of changes that essentially opened up three board seats. 

Elliott, which has amassed an 11% stake in Southwest, had insisted that it wanted Chief Executive Officer Bob Jordan to be removed. Prior to the shrinking of the board, it said it would nominate a 10-person slate. Elliott has since reduced the number of board nominees to reflect the smaller board size, people familiar with the matter said. 

Southwest announced a share buyback and detailed the ending of its open seating policy at an investor day in September.

Delta, JetBlue

Shares of Dallas-based Southwest have fallen around 40% over the last three years, leaving the company with a market value of about $18 billion. In the past year, Southwest shares are up by roughly 20% but still trail peers’ stock performance.

Elliott disclosed a roughly $2 billion stake in Southwest in June. It called for strategy and leadership changes at the carrier after what it saw as years of underperformance, pointing the finger squarely at Jordan and Kelly.

In July, Southwest adopted a so-called poison pill strategy to defend itself against Elliott, saying at the time that it had made good faith efforts to engage with the activist. In September, Southwest announced the revamp of its leadership that included plans for Kelly and six directors to step down.

Also last month, Southwest laid out a comprehensive plan designed to add $4 billion of operating profit by 2027. Jordan said the plan had been in the works since well before Elliott announced its stake. Jordan described Elliott’s campaign as “tactics and gamesmanship” and said a proxy fight wouldn’t be good for the company.

In a letter to fellow Southwest shareholders in August, Elliott said it preferred to avoid the distraction of a proxy fight. It said at the time that “Southwest is a storied American company that deserves to have the best stewards that its board can possibly provide.”

Elliott’s Tally

Led by Paul Singer, Elliott is one of the world’s busiest and most influential boardroom agitators and often manages to avoid loud proxy fights. In recent years, it has scored wins against high-profile targets including Starbucks Corp. and NRG Energy Inc.

Elliott rarely takes matters to shareholder votes and mostly seeks resolutions with target companies. Southwest is Elliott’s first request for an out-of-cycle shareholder meeting — a special meeting — since its founding in 1977.  

Artisan Partners Limited Partnership, another activist, is also invested in Southwest.

—With assistance from Mary Schlangenstein and Katherine Burton.