A battle has begun over the makeup of the United
Continental Holdings board of directors.
In a letter to the board on Tuesday, hedge funds Altimeter
Capital Management and PAR Capital Management, which together own 7.1% of
United’s common stock, said they will put up six candidates for board seats
when the carrier holds its annual meeting later this year.
The slate will be led by Gordon Bethune, who was CEO of
Continental from 1994 to 2004.
“Following careful consideration, we have firmly
concluded that meaningful change to United's existing board of directors is
urgently required in order to reverse long-standing poor board governance and
the resulting many years of substantial and inexcusable company
underperformance relative to United's competitors,” Brad Gerstner and Paul
Reeder, the respective CEOs of Altimeter and PAR, wrote. “In our view — given
United's valuable and industry-leading strategic asset base — this long-term
underperformance directly results from an underqualified, ineffective,
complacent and entrenched board.”
The two CEOs took their proxy fight public after the
United board added three new members and announced plans to add a fourth.
Gerstner and Reeder called that move a “knee-jerk response” to their push to
reshape the board.
The new board members are James Kennedy, who retired as
CEO of T Rowe Price Group at the start of this year; former Air Canada CEO
Robert Milton; and James Whitehurst, CEO of the IT company Red Hat and a former
Delta COO. United said that four board members would step down at or before the
annual meeting to make room for the new appointees.
In a statement Tuesday, United's nonexecutive chairman,
Henry Meyer III, accused Altimeter and PAR of beginning the proxy fight without
concern for how it could distract from plans being implemented by CEO Oscar
Munoz, who will return to work full-time next week after a five-month leave to
recover from a heart attack. Munoz took over the company in September,
replacing Jeff Smisek, who resigned as United’s top executive amid a corruption
probe.
“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,” Meyer said.
He added that the board remains open to talks with the
two investment firms.
United has yet to schedule its 2016 shareholders’
meeting. The carrier held its shareholders’ meeting in June last year.