Tenneco Inc. (“Tenneco”) (NYSE: TEN) announced today that its Board of Directors (the “Board”) adopted a shareholder rights plan designed to protect the availability of the Company’s tax assets (the “Plan”) and preserve long-term value for the benefit of all of Tenneco’s shareholders.
As of December 31, 2019, Tenneco had approximately $155 million of usable tax credits that could be available to offset future tax payments dollar-for-dollar. Tenneco’s ability to use these tax assets would be substantially limited if it experienced an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (“Section 382”).
In general, a company would undergo an ownership change if its “5-percent shareholders” (determined under Section 382) increased their collective ownership of such company’s stock by more than 50 percentage points over a rolling three-year period. The Plan is intended to reduce the likelihood of such an ownership change by deterring any person or group from acquiring beneficial ownership of 4.9% or more of Tenneco’s outstanding Class A Voting Common Stock (the “Class A Shares”).
Under the Plan, the rights will initially trade with Tenneco’s Class A Shares and Class B Non-Voting Common Stock and will generally become exercisable only if a person (or any persons acting as a group) acquires 4.9% or more of the outstanding Class A Shares. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount or Tenneco may exchange each right held by such holders for one share of common stock. Any person which currently owns 4.9% or more of the Class A Shares may continue to own their shares but may not acquire any additional shares without triggering the Plan. The Board has the discretion to exempt any person or group from the provisions of the Plan.
Tenneco intends to submit the Plan to a vote of its shareholders at its 2021 annual meeting. The Plan will expire on the day following the certification of the voting results for the 2021 annual meeting, unless Tenneco’s shareholders ratify the Plan, in which case it will continue in effect until October 2, 2021, the date on which the impact of certain transactions pursuant to the Company’s completion of its acquisition of Federal-Mogul will no longer be taken into account under relevant tax rules.
Additional information about the Plan will be available on a Form 8-K to be filed by Tenneco with the U.S. Securities and Exchange Commission.