Barron's: SWA could be leveraged buyout target

[SWA GUY]

"Leveraged buyout" is when current mgmt (and possibly private investors) purchase the outstanding stock in order to take the company private.

"Hostile takeover" is when an outsider attemps to gain control of the company buy purchasing controlling stock.

In the event of a hostile takeover, SWA mgmt would have two choices:

1) Select a white knight ( friendlies with loads of money) to purchase the stock and retain current mgmt.

2) Mgmt could whine and cry about the poison pill until the stock hits whatever price it needed to in order for mgmt sell out.

A hostile takeover bid anytime soon is very unlikely. It does however make for good conversation and speculation.

Peace out Homies!

 

[NuGuy]

Heyas,

Leveraged buy outs are bad, bad news. Legal looting is what it is.

1) Talk your golf buddies into fronting you the cash.

2) Gain %50 +1 of the stock.

3) Fire management and entire BOD.

4) Sell off all assets of the company to a buddies "dummy" company, then lease back the assets for huge $$$ cut. Pay back golf buddies and pocket difference.

5) Draw whatever retirement plans there are down to the minimum. Purchase minimum annuities for employees and pocket the difference.

6) Claim that "hard times" are causing cash crunch, and force employees to take huge cuts. Pocket money.

7) Profit!

8)Repeat as necessary

Note, if stuck in a bidding war in step 2, run the stock up as high as possible to cripple the other bidder, then bail. Pay back golf buddies, and pocket the difference.

Any questions?

Nu

 

[ultrarunner]

Typically, to get the attention of the big houses, you'll need to see a significant dip in the stock price resulting in a big decrease in market cap. With a low eps and a big dip in the stock price, then this scenario becomes more likely. However, that's the least of SWA's worries. The next couple of years will be fun to watch though, as there will be some significant consolidation resulting hopefully in a significant increase in fares.

 

[radarlove]

In terms of a "poison pill", LUV used to have one, where in event of substantial change of control of the company (leveraged buyout, or corporate raid) the current stockholders got three additional shares for each share they owned, or something like that.

LUV did away with the poison pill probably five or six years ago, so now there is no protection.

I don't think LUV has a very large concentration of stock ownership in managment, so a leveraged buyout would be very difficult, usually these things happen with management's approval.

On the other hand, perhaps LUV's CEO would like to make a quick couple of hundred million and would buy on to taking the corp. private. From what I've read, it's pretty unlikely.