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Navistar Adopts New Plan Replacing 'Poison Pill'

Truck and engine maker Navistar International on Tuesday said its board of directors has amended the company's stockholder rights plan, also known as a "poison pill," giving it a new protection against someone acquiring a significant portion of the company.

by Staff
June 24, 2014
Navistar Adopts New Plan Replacing 'Poison Pill'

 

3 min to read


Truck and engine maker Navistar International on Tuesday said its board of directors has amended the company's stockholder rights plan, also known as a "poison pill," giving it a new protection against someone acquiring a significant portion of the company.

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"This tax asset protection plan was adopted to protect the long-term value of Navistar's substantial tax assets," Navistar said in a release. It will expire on September 1. The existing stockholder rights plan was to expire on July 1.

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The current plan was first adopted in June 2012 and exempted any person or group from owning 15% or more of the company's common stock. That plan was amended in July 2013 with the exemption increased to 19.99% and the expiration extended to June 18, 2015. On June 17, 2014, the plan was further amended to have the plan expire on July 1, 2014. At the company's annual meeting of stockholders in March 2014, a non-binding advisory vote to terminate the stockholder rights plan was proposed and overwhelmingly approved.

"Since the inception of the stockholder rights plan, the Navistar board has regularly reviewed the plan to determine its alignment with the best interests of the company," said James Keyes, Navistar board of directors non-executive chairman. "In adherence with corporate governance best practices and with the consideration of the input of our shareholders, we believe the existing stockholder rights plan should be removed, but at the same time, it is appropriate to implement this tax asset protection plan."

Navistar said the tax asset protection plan was adopted to protect its valuable tax assets by reducing the likelihood of an unintended "ownership change" under IRS guidelines. This plan is similar to tax protection plans adopted by other public companies with significant tax attributes, according to Navistar. As of October 31, 2013, Navistar had a federal net operating loss carry forward of approximately $1.8 billion.

It claims under IRS rules, the use of the company's net operating loss and other carry forwards would be limited in the event of an "ownership change," which is defined as a cumulative change of more than 50% during any three-year period by stockholders owning 5% or more of the company's stock.

Navistar said the tax asset protection plan is designed to discourage any person or group from becoming a 5% stockholder, thereby reducing the risk of such an ownership change.

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"There is no guarantee, however, that the plan will prevent the company from experiencing an ownership change, and the company may pursue additional means of protecting this substantial asset," Navistar said.

Existing stockholders holding 4.99% or more of the company's outstanding shares of common stock are exempt from the provisions of the plan unless they make additional purchases, according to Navistar.

 

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