Gogo Inc. today announced that its Board of Directors has adopted a Section 382 Rights Plan to preserve and protect Gogo’s ability to utilize its large net operating loss carryforwards (“NOLs”) and other tax assets.
As of December 31, 2019, Gogo had approximately $580 million of federal tax NOLs, $430 million of state tax NOLs and $196 million in federal interest expense carryforwards which could be used in certain circumstances to reduce its future tax liability. The purpose of the Plan is to protect Gogo’s ability to use these tax assets, which would be substantially limited if Gogo experienced an “ownership change” as defined under Section 382 of the Internal Revenue Code. In general, an ownership change would occur if one or more of Gogo’s shareholders who are deemed to be owners of 5 percent or more of its shares under Section 382 collectively increase their aggregate ownership of Gogo’s shares by 50 percentage points or more (measured over a rolling three-year period).
Under the Plan, Gogo is issuing one Right for each share of its common stock outstanding at the close of business on October 2, 2020. Shareholders are not required to take any action to receive the Rights. Gogo intends to submit the Plan to a vote of its stockholders at its 2021 annual meeting. The Plan will expire on the day following the certification of the voting results for Gogo’s 2021 annual meeting, unless Gogo stockholders ratify the Plan at or prior to such meeting, in which case the Plan will continue in effect until September 23, 2023, unless terminated earlier in accordance with its terms.
Pursuant to the Plan, the Board declared a dividend of one preferred share purchase right for each outstanding share of common stock. The Rights will be exercisable only if a person or group acquires beneficial ownership of 4.9 percent or more of Gogo’s common stock. Gogo’s existing stockholders that currently beneficially own 4.9 percent or more of the common stock will be “grandfathered” at their current ownership levels. GTCR and its affiliates, which currently own 14.9 percent of Gogo’s common stock, have indicated their support for the adoption of the Plan. If the Rights become exercisable, all holders of Rights, other than the person or group triggering the Rights, will be entitled to purchase Gogo common stock at a 50% discount or the Company may elect to exchange each right held by such holders for one share of common stock. Rights held by the person or group triggering the Rights will become void and will not be exercisable or exchangeable. The Board of Directors has the discretion to exempt any person or group from the provisions of the Plan.
Additional information regarding the Plan will be contained in a Form 8-K filing with the Securities and Exchange Commission.