In a strategy to preserve between $228 million and $350 million in tax benefits, Beazer Homes USA's board has re-enacted a stockholder's rights plan that it had let expire before it issued more equity in January.
Under the plan, the acquisition of 4.95% of the company's outstanding stock by any individual or group would trigger the issuance of one right for each share of existing stock outstanding on Nov. 22, diluting the percentage owned by the purchaser and keeping the company from having an ownership change under tax law. Ownership changes, defined as the cumulative change in ownership among shareholders with more than a 5% share of ownership, impacts a company's ability to write off future profits against past losses.
Stockholder rights plans began as a way for a company to prevent a hostile takeover through stock purchases. Used in that way, they are called "poison pills." However, as the market crashed and home builders began to accumulate large losses that they can carry forward and use to claim against future profits, companies began using the same approach to protect those future tax claims.
Beazer issued a shareholder's rights plan several years ago that had expired during the first part of this year about the same time it had an equity offering. The stock sale was large enough to trigger a change in ownership in January 2010. It had had another change of ownership under the tax code in December 2007.
Beazer's board of directors approved the newest stockholder rights plan Nov. 15. The company plans to ask shareholders to approve the rights plan at its next annual meeting. If they don't, it will terminate.
"The company believes the rights plan serves the interests of all stockholders by attempting to protect the company's ability to use its deferred tax assets to offset tax liabilities in the future," the news release stated. "The rights plan was not adopted as an anti-takeover measure, and once the deferred tax assets have been substantially realized, the board of directors intends to terminate the rights plan."
