Westmoreland Adopts Tax Benefits Preservation Plan
September 05 2017 - 8:15AM
Westmoreland Coal Company (Nasdaq:WLB) announced today that its
Board of Directors has adopted a stockholder rights plan (the
“Rights Plan”) designed to protect Westmoreland’s ability to use
its valuable net operating loss (“NOL”) carryforwards and certain
other valuable tax attributes. The plan, similar to those
adopted by other public companies, diminishes the risk that the
Company’s existing NOL carryforwards and other tax attributes
become limited under Section 382 of the Internal Revenue Code
(“IRC”) for use to reduce potential future federal income tax
obligations.
As of December 31, 2016, Westmoreland had a U.S. federal NOL
carryforward of $581 million, together with certain other tax
attributes. Westmoreland’s ability to utilize these tax
assets would be substantially limited if an ownership change as
defined under IRC Section 382 occurs. In general, an
ownership change will occur when the percentage of Westmoreland’s
ownership by one or more 5-percent stockholders as defined under
IRC Section 382 has increased by more than 50 percentage points at
any time during the prior three years. The purpose of the
Rights Plan is to deter an ownership change from occurring under
these technical rules, which will protect Westmoreland’s ability to
utilize its valuable NOLs and other tax attributes.
Under the Rights Plan, Westmoreland stockholders of record as of
the close of business on September 18, 2017 will receive one
preferred share purchase right for each share of common stock
outstanding. Pursuant to the Rights Plan, if a stockholder
(or group) acquires beneficial ownership of 4.75% or more of the
outstanding shares of Westmoreland’s common stock without prior
approval of the Board of Directors or without meeting certain
customary exceptions, the rights would become exercisable and
entitle stockholders (other than the acquiring stockholder or
group) to purchase additional shares of Westmoreland at a
significant discount and result in significant dilution in the
economic interest and voting power of the acquiring stockholder or
group. Alternatively, the Board of Directors may, at its
election, cause each right to be exchanged for additional shares of
Westmoreland without the payment of any purchase price, which would
also cause a significant dilution in the economic interest and
voting power of the acquiring stockholder or group. Existing
stockholders who currently beneficially own 4.75% or more of the
outstanding shares of common stock will cause this dilutive event
to occur only if they acquire additional shares. The Board has
discretion to exempt certain transactions from the provisions of
the Rights Plan.
The Westmoreland Board of Directors determined that the Rights
Plan was warranted and in the best interest of all stockholders due
to the substantial size of the NOLs and other tax attributes, the
importance of their potential tax benefits, and the risk of losing
such potential tax benefits if Westmoreland experiences an
ownership change as defined by IRC Section 382. While current
stockholders are not required to take any action in connection with
the adoption of the Rights Plan, Westmoreland will submit the
continuation of the Rights Plan to a stockholder vote at the 2018
Annual Meeting of Stockholders. The failure to obtain stockholder
approval will result in the termination of the Rights Plan in
2018. If stockholders approve the Rights Plan, it will
continue in effect until September 5, 2020, unless terminated
earlier. In addition, the Board of Directors may terminate
the Rights Plan if it determines that the tax attributes have been
exhausted, that the Rights Plan is no longer in Westmoreland’s best
interest or if other events occur as described in the Rights Plan
that will be filed with the Securities and Exchange
Commission. The issuance of the rights is not a taxable event
and will not affect Westmoreland’s reported financial conditions or
results of operations.
The Rights Plan is not meant to be an anti-takeover measure, and
the Westmoreland Board of Directors has established a procedure to
consider requests to exempt acquisition of Westmoreland common
stock from the Rights Plan if it determines that doing so would not
limit or impair the availability of the tax attributes.
Westmoreland will file additional information about the terms
and conditions of the Rights Plan with the Securities and Exchange
Commission.
BMO Capital is acting as financial advisor and Kirkland &
Ellis LLP is acting as legal counsel to Westmoreland.
About Westmoreland
Westmoreland Coal Company is the oldest independent coal company
in the United States. Westmoreland’s coal operations include
surface coal mines in the United States and Canada, underground
coal mines in Ohio and New Mexico, a char production facility, and
a 50% interest in an activated carbon plant. Westmoreland also owns
the general partner of and a majority interest in Westmoreland
Resource Partners, LP, a publicly-traded coal master limited
partnership (NYSE:WMLP). For more information, visit
www.westmoreland.com.
Forward Looking Statements
Westmoreland claims the protection of the safe-harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
subject to uncertainties that could cause actual future events and
results to differ materially from those expressed in the
forward-looking statements. Forward-looking statements
include, but are not limited to, statements regarding the expected
benefits of the transaction. These and other forward-looking
statements regarding Westmoreland’s business outlook are based on
Westmoreland’s current expectations and assumptions regarding its
business, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. Actual results may differ materially from
those contemplated by the forward-looking statements. Westmoreland
cautions you against relying on any of these forward-looking
statements. They are statements neither of historical fact nor
guarantees or assurances of future performance. Possible events or
factors that could cause actual results or performance to differ
materially from those anticipated in our forward-looking statements
include, but are not limited to the following:
- the difficulty of determining all of the facts relevant to IRC
Section 382;
- unreported buying and selling activity by securityholders;
- unanticipated interpretations of the IRC and related
regulations;
- the adoption of the Rights Plan may not prevent one or more
securityholders of Westmoreland from, notwithstanding the dilution
to such securityholder’s interests under the Rights Plan, engaging
in buying and selling activity that may have an adverse impact on
Westmoreland’s tax attributes; and
- those factors under “Risk Factors” in Item 1A of Part I of
Westmoreland’s Annual Report on Form 10-K for the year ended Dec.
31, 2016, and in subsequent filings with the SEC at
www.sec.gov.
For further information please contact
Gary Kohn
Chief Financial Officer
1-720-354-4467
gkohn@westmoreland.com