Updated: Legal Battle Unleashed | Lawsuit Aims To Halt Hawaiian Merger

Adding to a multitude of concerns facing two leading Hawaii-focused airlines, a new challenge has just surfaced. On January 10, 2024, a shareholder filed a lawsuit in New York District Court for the Southern District of New York challenging the acquisition of Hawaiian Airlines by Alaska Airlines.

Hawaiian Airlines' Triple Whammy: From Turmoil to Acquisition To Unknown

This comes following Alaska’s plan to buy Hawaiian Airlines in a $1.9 billion deal that would allow them to capture forty percent of the Hawaii airline market. And, should that deal not be consummated, Hawaiian will face huge, and perhaps insurmountable, business headwinds. The company itself stated a need for acquisition due to expansion complexities, required modernization, and back-breaking $900 million in debt.

Securities lawsuit filed by one of Hawaiian’s shareholders, Deann Owen.

The lawsuit seeks to invalidate the $1.9 billion deal. Among the suit’s claims is that the transaction will damage Hawaiian’s shareholders and benefit select company insiders only.

The plaintiff claims that defendants violated Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 among other things.

Section 14(a) relates to the solicitation of proxies and requires disclosure of material information in connection with the solicitation of proxies for corporate meetings. This seeks to ensure that shareholders have the necessary information to make informed decisions when voting on company matters

Section 20(a) imposes liability on controlling persons for the actions of those that they control. This section is to hold individuals or entities accountable for the actions of those under their control as related to securities law violations.

The suit claims further that in an SEC filing, Hawaiian’s board agreed has now agreed to a $2 per share lower offer than the $20 that was previously indicated.

Who is named in the US District Court case filed against Hawaiian Holdings?

Named in addition to Hawaiian Holdings, parent company of Hawaiian Airlines is Hawaiian CEO Peter Ingram. In addition, other defendants include Hawaiian Chairman of the Board Lawrence Hershfield, Hawaiian board directors Michael McNamara, Crystal Rose, Wendy Beck, Earl Fry, Craig Vosburg, Richard Zwern, and Jayne Hrdlicka, and Hawaiian Special Preferred Stock Designees Daniel Akins, Duane Woerth, and Mark Schneider.

What to watch for next in the planned Hawaiian/Alaska deal?

In a related matter, Hawaiian disclosed in an SEC filing earlier this week that a special meeting of stockholders is scheduled for February 16 to vote on the merger/acquisition of Hawaiian Airlines. Shareholders will also consider compensation for named executive officers in connection with the purchase.

Also this week, Hawaiian and Alaska officially filed with the U.S. Justice Department for antitrust clearance to be given them in their proposed $1.9 billion deal. How that plays out may be a first indication of exactly what stance federal regulators may take in this deal.

That is the filing which outlines that shareholders are set to receive a premium of $18.00 cash for each share, which is nonetheless a substantial increase from the stock’s pre-acquisition announcement trading price. The Hawaiian Airlines Board has already approved the merger plans. Shareholder concurrence, however, is also required.

As we said previously, Hawaiian remains committed to Alaska’s proposal. However, until the deal is consummated, however, Hawaiian must remain independent and resilient. Thus, they are open to other offers, should any be forthcoming.

Big questions linger on about factors including the stance of U.S. regulators on the merger, in the current anti airline merger atmosphere. Do you have any concerns or other input?

Updated 1/12/24.

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18 thoughts on “Updated: Legal Battle Unleashed | Lawsuit Aims To Halt Hawaiian Merger”

    1. ESOP’s don’t have a great record in the airline industry. From United to PeopleExpress or the massive failure and aptly named Pride Air, getting employees to all agree on a common direction is like herding kittens.

    1. Could very well be Lee….It’s not just corporate raiders like Carl Ichan and Frank Lorenzo that are happy to cost thousands of workers their livelihoods if they can make money doing it. Safe to say any headwinds this merger encounters likely will be from competitors that fear it or people trying to line their pockets….or politicians in the pocket of the competitors….geez, I sound pretty cynical

  1. I don’t get the short sighted backlash against this merger. No one is going to pay more for an withering airline with a terminal business model destroyed by the lockdowns. Without this merger, Hawaiian Airlines will not exist by the end of 2025, the stock will be worth zero and thousands of locals will be unemployed.

  2. The merger creates a stronger position in the market for both Hawaiian and Alaska…..for sure their competitors don’t want that. Have to wonder who is doing what behind the scenes….there’s always more to the picture. Can’t see how anyone can successfully argue this is bad for the shareholders…..if someone was willing to pay more they are free too. Or standing alone with 900 million debt and at the mercy of the next unpredicted disaster? That would somehow be better?

  3. To the shareholder(s) who fifled the suit, I say be careful what you wish for. Hawaiian is financially in trouble and if the merger does not go through and Hawaiian declares bankruptcy or shuts down, what will their shares be worth then? I say take the offer and run. It’s risky to not allow the merger for the health of Hawaiian airlines.

  4. Stop the merger, let the airline die and everybody will be happy.Then later on everyone will lament this should not have happened.

  5. Someone should do some research on who this person is who filed the lawsuit, and why it was filed in the Southern District of New York. That jurisdiction has a strong record of cases going in one direction! And it’s thousands of miles from Hawaii or Alaska! Why wasn’t the lawsuit filed here in Hawaii, instead? Likely because it would go nowhere. Hawaii residents don’t want Hawaiian Airlines to die in bankruptcy, like Aloha Airlines did. We want options. We don’t want Southwest Airlines to be our only interisland options. Perhaps some wealthy “shareholders” care about themselves more than they care about 1 Million Hawaii residents.

    1. No reason to file in Hawaii. NY is where many financial transactions occur and may very well be where stockholder has standing. Plus (not a financial expert) but since it is a traded stock, Im assuming that due to NASDAQ being in NY it may have something to do with it, or that law firm is based there.

      1. Greg, the reason this lawsuit should have been filed in either Hawaii or in Alaska are social (“Aloha Spirit”), and not financial. If the goal is purely money, then yes: file in New York City’s Southern District, and then the New York City’s 2nd Circuit Appeals Court can hear any appeal. Neither court judges nor juries in NYC likely give 2 hoots for the desires of Hawaii’s residents. The above story does not say which Airline stock that this stockholder owns. The Ethical (“Pono”) thing to do would have been to not file at all, or at least to file in one of the 2 States most affected.

        1. This kind of lawsuit would have to be in federal court. There are very complex and specific jurisdictional rules where lawsuits can be filed and heard. If it is in the wrong location the court/judge can dismiss the suit due to lack of jurisdiction.

  6. So shareholders of Hawaiian Airlines are getting a higher price for their currently owned stock and that person is whining about that!? So much for diminished shareholder value. They are certainly funny, just not in a good way.

    1. I would think the route itself will survive. Alaska doesn’t currently fly out of Sky Harbor, so there isn’t a possibility of duplicate flights. Now, whether the flight is still via an HA flagship plane versus an AA plane would remain to be seen.

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