J.C. Penney Co. Inc. said Monday it has extended its existing stockholder rights plan for another three years.
The current plan, as amended, would now expire n Jan. 25, 2020. While companies typically have the plans to prevent a change in ownership, J.C. Penney said the extension for another three years was to protect the company’s “valuable net operating loss carryforwards.”
The retailer said that it had about $2.6 billion in NOLs at the end of fiscal 2015. These NOLs can be used in certain circumstances to offset future taxable income and reduce federal income tax liability. The company further noted that its ability to use its NOLs would be “substantially limited” if there were to be an ownership change under applicable tax law. The retailer also emphasized that the “right plan is similar to plans adopted by other public companies with significant net operating losses.”
Under the rights plan, if any person or group acquires a 4.9 percent or more of the outstanding shares of common stock of the company without the approval of the board of directors, a triggering event would occur that would cause significant dilution in the ownership interest of that person or group.
J.C. Penney further said it plans to submit the extension of the plan to a vote at the next annual stockholders’ meeting this May, and if shareholders do not approve of the extension, the plan would terminate.