Southwest Airlines introduced Wednesday that it has adopted a shareholder rights plan, extra generally referred to as a “poison tablet,” in response to activist Elliott Management’s investment within the airline and push to oust CEO Bob Jordan and chairman Gary Kelly.

Southwest shares had been flat on the information in pre-market buying and selling Wednesday.

The poison tablet will solely activate if Elliott — or one other investor — acquires no less than 12.5% of the corporate. If that threshold is crossed, all different shareholders will probably be entitled to buy one new Southwest share for each share they at present personal at a 50% low cost.

Elliott disclosed in June that it had amassed a $1.9 billion stake, or about 11% of Southwest. Elliott known as out Southwest’s underperformance relative to a few of its large-airline rivals that supply extra merchandise like premium seating.

Southwest stated the poison tablet was adopted partly as a result of Elliott had made filings with antitrust authorities that will enable the activist to amass a good bigger stake.

“Southwest Airways has made a superb religion effort to interact constructively with Elliott Funding Administration since its preliminary funding and stays open to any concepts for lasting worth creation,” Kelly stated in an announcement. Elliott and Southwest administration met in particular person simply two weeks in the past, in accordance with folks aware of the matter.

Such a provision would dilute Elliott’s affect and energy over voting. Corporations typically undertake shareholder rights plans in response to an activist risk; rental automobile firm Hertz adopted a poison pill in 2013 in response to “uncommon” buying and selling exercise that administration thought presaged an activist.

Southwest’s board backed the corporate’s management after Elliott disclosed its stake. Jordan stated he had no plans to resign.

The Dallas-based airline has struggled with points together with an oversupplied home market, the place its community is targeted, and prolonged delays of latest planes from Boeing.

The airline had been underneath stress even earlier than Elliott’s funding to ramp up income and has stated it’s learning massive changes to its longstanding enterprise mannequin by doubtlessly including seating assignments and even premium seating. Southwest had been wildly profitable all through a lot of its historical past, pulling in income for many of its greater than 5 many years of flying, an outlier within the boom-and-bust trade.

Elliott has mounted campaigns at different firms resembling AT&T, Salesforce and Texas Instruments.

Elliott’s activist observe has helped it change into some of the profitable hedge funds on this planet, surpassing $65 billion in property. The agency, which moved its headquarters in 2020 from New York to West Palm Seaside, Florida, has solely had two shedding years in 5 many years.

Financial institution of America and Morgan Stanley function Southwest’s bankers. Vinson & Elkins and Kirkland & Ellis, two legislation corporations with well-regarded activism protection practices, are Southwest’s attorneys.

Elliott didn’t instantly reply to a request for remark.