Two United Continental Holdings shareholders will nominate airline turnaround artist Gordon Bethune to lead a slate of new directors in an effort to overhaul the airline’s management.
Hedge funds Altimeter Capital Management LP and PAR Capital Management Inc. on Tuesday said they would encourage United stockholders to elect six new board members. The announcement came a day after United named three independent director candidates of its own.
“As long-term United stockholders, we have been greatly disappointed with United’s poor performance and bad decisions over the last several years,” Altimeter CEO Brad Gerstner said in a statement. “Yesterday’s last-ditch effort –- adding just three people to its now 15-person board –- is a cynical attempt to preserve power by this entrenched board.”
Friday is the deadline to nominate directors. There is still a chance the two sides could reach an agreement.
“I won’t stay for more than 2 years. I really am getting too old to do this,” Bethune, 74, said in an interview. “But I want to help the people who are my friends, who are the employees.”
United said on Sunday that Chief Executive Officer Oscar Munoz would return to his role full time on March 14, two months after getting a heart transplant. United’s board had been criticized for its slow response to Munoz’s health issues.
United Continental Holdings today confirmed that it has been informed by hedge funds PAR Capital Management, Inc. and Altimeter Capital Management, L.P. of their intention to nominate six director candidates for election to the Board of Directors at the Company’s 2016 Annual Meeting of Shareholders. The nominees include Gordon Bethune, Brad Gerstner, Barney Harford, Rodney O’Neal, Tina Sharkey and Brenda Yester Baty. PAR and Altimeter have previously disclosed that they are acting as a group that collectively owns approximately 7.1% of the Company’s outstanding shares of common stock.
Henry L. Meyer III, Non-Executive Chairman of the Board, said, “We are deeply disappointed that after United attempted to engage in a constructive, good-faith dialogue with PAR and Altimeter, repeatedly communicated our willingness to make meaningful changes in our Board, publicly announced our intention to name four new independent directors with deep relevant experience and named three of them yesterday, PAR and Altimeter have unilaterally taken this hostile action with no concern that a proxy fight could distract the Company from executing on Oscar’s strategic plan.”
During United’s discussions with PAR and Altimeter, the Company clearly communicated its interest in negotiating a reasonable settlement and, in a show of good faith, offered to amend its bylaws to extend its March 12 director nomination deadline. Despite the Company’s offer, not only were PAR and Altimeter uninterested in extending the deadline, but they also refused to cooperate in making their nominees available to be interviewed – which would be a necessary step for the Board to recommend any of their candidates – before launching a proxy contest.
Meyer added, “Underscoring our commitment to good corporate governance, and with the benefit of shareholder input, the Board just appointed three new independent directors with deep relevant experience to the Board, and we plan to appoint a fourth new independent director in the near term. We remain open to engaging in productive conversations with PAR and Altimeter.”
Oscar Munoz, who plans to resume the role of President and Chief Executive Officer on March 14, 2016, said, “We have been focused on improving the customer and employee experience at United, and the results are evident in our improved operational and financial performance. United has emerged as a top performer in on-time arrivals and completion factor among our largest industry peers. United’s 2015 earnings were one of the best in the Company’s history, and we made progress shrinking the margin gap with our closest competitors, strengthening our balance sheet, and returning significant cash to shareholders. Our momentum is strong, we are working hard, and we are confident there is substantial upside yet to come.”
Yesterday, the Company announced that its Board of Directors had appointed three new highly qualified independent directors to the Board: James A.C. Kennedy, the former President and Chief Executive Officer of T. Rowe Price Group, Inc., Robert A. Milton, the former Chairman and Chief Executive Officer of ACE Aviation Holdings Inc., and previously Chairman, President and Chief Executive Officer of Air Canada, and James M. Whitehurst, President and Chief Executive Officer of Red Hat, Inc., and previously Chief Operating Officer of Delta Air Lines, Inc., effective immediately.
United’s three new directors will be nominated by the Board for re-election at the 2016 Annual Meeting. The Board expects to appoint a fourth new independent director in the near term, who would also be nominated for re-election at the 2016 Annual Meeting. In connection with the appointment of the new directors, certain current directors will step down from the Board at or in advance of the 2016 Annual Meeting.