By Lauren Thomas, Wall Street Journal, thanks to Frank Wright
Elliott: Prepares to Launch Proxy Fight – Starbucks replaces CEO
Elliott Prepares to Launch Proxy Fight at Southwest Airlines
The activist plans to nominate as many as 10 directors to the carrier’s board
Elliott Investment Management is preparing to launch a proxy fight at Southwest Airlines LUV 0.16%increase; green up pointing triangle, according to people familiar with the matter, as the activist turns the heat up a notch in its battle with the Dallas-based carrier.
The details
Elliott plans to nominate as many as 10 director candidates to Southwest’s 15-person board, the people said. The activist is preparing to call a special meeting that would allow shareholders to vote on the candidates. (Southwest’s annual meeting is typically held in mid-May.) Elliott revealed earlier this summer it had built a big position in Southwest and aimed to overhaul the company’s leadership. It owns nearly 42 million shares of Southwest, or 7% of the shares outstanding, according to a 13D filing from earlier this month. The firm has a roughly 11% interest when also including derivatives.
The activist has been calling for the replacement of Southwest Chief Executive Bob Jordan, who took over in February 2022. Elliott has also been calling for the ouster of Executive Chairman Gary Kelly, Jordan’s predecessor. Elliott still believes Jordan and Kelly should be replaced, but is focused in the near term on overhauling the board. The candidates Elliott plans to nominate have backgrounds in the airline, technology and hospitality industries, among others, and aren’t Elliott employees, the people said.
The context
Southwest’s shares have dropped about 12% this year, bringing the company’s market value to a little more than $15 billion. Southwest executives have been trying to address its financial malaise. In a break with its tradition, the company unveiled a plan in July to assign seats on flights and sell some with extra legroom.
Southwest’s profit margins have lagged behind rivals and the airline is starting to pull back from some cities it entered as part of an ambitious expansion strategy. Southwest has said it was studying potential changes before Elliott showed up. The company also appointed a new board member in July. After Elliott arrived, Southwest adopted a shareholder-rights plan, also known as a poison pill, meant to make it difficult for an investor to buy more than 12.5% of the company.
Elliott is known for taking on tech companies and others and forcing changes that include management shake-ups and outright sales. Several companies in which Elliott has recently built positions have ultimately replaced their CEOs, including wireless-tower owner Crown Castle and Starbucks on Tuesday.
Starbucks replaces CEO after pressure from activist investors Elliott, Starboard
Elliott Management has also pushed for change at Dallas-based Southwest Airlines.
Max Zimmerman for Bloomberg, thanks to Frank Wright
Starbucks Corp. has named Chipotle Mexican Grill Inc. Chief Executive Officer Brian Niccol as the coffee chain’s new CEO and chairman, replacing Laxman Narasimhan after just over a year in the role. Chief Financial Officer Rachel Ruggeri will serve as interim CEO until Niccol starts his new role on Sept. 9, the company said in a statement. Mellody Hobson, Starbucks board chair, will become lead independent director. Narasimhan will also step down from his seat on the board.
Starbucks shares jumped 12% on the news in premarket trading, while Chipotle shares fell 10%. The abrupt leadership shakeup comes after activist investors Elliott Investment Management and Starboard Value reportedly amassed stakes in the company. Starbucks and Elliott were in talks to add Jesse Cohn, a managing partner at the activist investor, to its board of directors. The coffee chain was also considering setting up committees to review capital allocation and operational improvements.
Elliott has taken aim at several companies recently, including Dallas-based Southwest Airlines, where it is pushing the carrier to replace members of its board of directors as well as executive leadership, including CEO Bob Jordan and chairman Gary Kelly. Niccol joined Chipotle as CEO in 2018 and became chair of the company’s board in 2020. Before joining Chipotle, he was the CEO of Taco Bell.