Gannett adopts ‘poison pill’ to keep tax benefit as COVID-19 continues

Gannett, the owner of USA TODAY and more than 260 other daily publications, announced Tuesday that its board had implemented a plan to ensure that the company maintains access to about $435 million in tax benefits.

The company adopted what Wall Street calls a “poison pill,” which is a measure aimed at blocking investors from suddenly accumulating a large portion of the company without a board’s blessing.

In this case, Gannett adopted the plan because of a tax law that would significantly reduce its tax net operating loss carryforwards, known as NOLs, if investors owning more than 5% of the company’s stock acquired shares totaling 50% or more.

From a technical perspective, the “shareholder rights plan” involves the declaration of a non-taxable dividend of one preferred share purchase right for each outstanding share of common stock. Those rights can only be exercised if an investor acquires 4.99% or more of Gannett, which the board must now authorize. Existing investors owning more than 4.99% will be “grandfathered in” and will be subject to the rights plan if they acquire an additional 0.5%.