RRI Energy Inc. (RRI) put a shareholder-rights plan in place
Tuesday that should protect a tax-benefit tool if it discovers its
merger of equals with Mirant Corp. (MIR) doesn't cause a ownership
change.
RRI and Mirant's merger was designed to give neither company's
investors a premium, as the two aim to reduce costs by combining
corporate functions.
RRI previous expected the merger into GenOn Energy Inc. would
cause an ownership change, limiting the amount of net operating
losses it could use to reduce its tax liability after the deal,
which is expected to close by the end of the year. Net operating
losses can be used to offset future income-tax payments.
After a review of Securities and Exchange Commission filings and
guidance from the IRS, RRI learned that the merger may not cause an
ownership change, sparking the rights agreement amendment.
The new rights plan reduces the beneficial ownership trigger to
4.99% from 15% and exempts certain shareholders, such as
pre-existing RRI shareholders with more than 4.99% stakes and GenOn
holders with the same stake percentage as a result of the
merger.
As a result of the amendment, the rights plan is now similar to
tax benefit preservation plans adopted by many other public
companies with significant net operating losses.
GenOn will analyze overlapping holdings after the merger and
will redeem the rights agreement if it determines an ownership
change has occurred.
RRI shares were down 0.3% at $3.57 after hours, following a 2.5%
decline in the regular session. Mirant shares weren't active after
closing down 2.7% to $10.08. The drop in both outpaced a broader
market fall.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com