CHARLOTTE, N.C., June 15, 2011 /PRNewswire/ -- MedCath Corporation
(Nasdaq: MDTH), a healthcare provider focused on high acuity
healthcare services, today announced that its Board of Directors
has adopted a Section 382 rights plan intended to preserve the
value of certain of the Company's tax attributes (the "Tax
Attributes").
As of June 14, 2011, the Company
has Tax Attributes which may entitle the Company to either reduce
income taxes that may otherwise become due or to seek a refund of
income taxes due with respect to the Company's current 2011 tax
year totaling up to as much as approximately $40,000,000 of tax reductions. However,
these Tax Attributes may be materially reduced or eliminated by a
"change of ownership" of the Company under Section 382 of the
Internal Revenue Code (a "change of ownership"). If a change of
ownership were to occur, the actual amount of Tax Attributes that
could be materially reduced or eliminated would depend upon various
factors, which among others include: (i) when the change of
ownership occurred, (ii) the order in which certain hospitals owned
by the Company are sold, (iii) the final sale price of certain
hospitals owned by the Company and (iv) the timing of
the liquidation of certain of
the Company's subsidiary limited liability companies
or limited partnerships which have already sold their hospitals. In
general, a change of ownership would occur if stockholders that own
(or are deemed to own) at least 5 percent or more of the
Company's outstanding common stock increased their cumulative
ownership in the Company by more than 50 percentage points
over their lowest ownership percentage within a rolling three-year
period beginning October 1, 2010.
As part of the Plan, the Company's Board of Directors declared a
dividend of one preferred stock purchase right on each outstanding
share of the Company's common stock. The dividend will be payable
to holders of record as of the close of business on June 29,
2011. Shares of the Company's common stock issued after the record
date will be issued together with those rights.
The preferred stock purchase rights are not currently
exercisable and initially will trade only with the Company's common
stock. However, if any person or group acquires 4.99% or more of
the Company's common stock, or if a person or group that already
owns 4.99% or more of the Company's common stock acquires
additional shares, then, subject to certain exceptions, the
preferred stock purchase rights would separate from the common
stock and become exercisable for shares of the Company's common
stock having a market value equal to twice the exercise price,
resulting in significant dilution to the ownership interests of the
acquiring person or group.
The Company's Board of Directors has established a procedure to
consider requests to exempt acquisitions of the Company's common
stock from the Plan if it determines that doing so would not limit
or impair the availability of the Tax Attributes.
The rights will expire on September 30,
2013. The rights may also expire on an earlier date upon the
occurrence of other events, including a determination by the
Company's Board of Directors that the Tax Attributes have been
utilized or are no longer available, or that the Plan is no longer
necessary to protect the Tax Attributes. The Plan also may be
terminated at any time by the Board before the rights become
exercisable. The Company intends to submit the Plan for
stockholder approval within 12 months of the date of its
adoption.
The Plan is similar to Section 382 rights plans adopted by many
other public companies with significant Tax Attributes. The
issuance of the preferred stock purchase rights will not affect the
Company's reported earnings or loss per share and is not taxable to
the Company or its stockholders.
On June 13, 2011, the Company also
adopted a new governance policy on stockholder rights plans.
The policy provides that any stockholder rights plan adopted
by the Board without prior stockholder approval will be submitted
to a stockholder vote for ratification within twelve (12) months of
the adoption of such stockholder rights plan.
Additional information regarding the Plan will be set forth in a
Current Report on Form 8-K and in a Registration Statement on Form
8-A that the Company is filing with the Securities and Exchange
Commission.
Parts of this announcement contain forward-looking statements
that involve risks and uncertainties including but not limited to
the value and ability of the Company to realize the benefits of
certain tax attributes, those relating to the consummation of the
382 Rights Plan adopted by the MedCath Board of Directors and the
timing of a stockholders vote regarding the Plan. Although
management believes that these forward-looking statements are based
on reasonable assumptions, these assumptions are inherently subject
to significant economic, regulatory and competitive uncertainties
and contingencies that are difficult or impossible to predict
accurately and are beyond our control including, but not limited
to, our ability to realize the benefits the tax attributes
described herein, and other factors. Actual results could
differ materially from those projected in these forward-looking
statements. We do not assume any obligation to update these
statements in a news release or otherwise should material facts or
circumstances change in ways that would affect their accuracy.
These various risks and uncertainties are described in detail in
"Risk Factors" in MedCath's Annual Report or Form 10-K for the year
ended September 30, 2010 filed with
the Securities and Exchange Commission on December 14, 2010, as amended. Copies of
our filings with the Securities and Exchange Commission, including
exhibits, are available at http://www.sec.gov.
SOURCE MedCath Corporation