SEATTLE, May 5, 2011 /PRNewswire/ -- Onvia, Inc. (Nasdaq: ONVI), the leading provider of gBusiness solutions, today announced that its Board of Directors has approved the adoption of a tax benefits preservation plan in the form of a Section 382 Rights Agreement designed to protect and preserve the long-term value of certain tax assets primarily associated with net operating loss carryforwards. The tax benefits preservation plan, which replaces Onvia's current stockholder rights plan, is similar to tax benefits preservation plans adopted by many other public companies with significant tax assets.
As of March 31, 2011, Onvia had approximately $75 million of (pre-tax) federal net operating loss carryforwards or NOLs that could be utilized in certain circumstances to offset Onvia's taxable income and reduce its federal income tax liability. Additional information with respect to these NOLs will be contained in Onvia's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 that Onvia is filing with the Securities and Exchange Commission.
In adopting the tax benefits preservation plan, Onvia's Board took into consideration that in recent months Onvia had received a number of unsolicited expressions of interest from third parties to acquire Onvia and that these expressions of interest could lead to changes in Onvia's investor base that could have the unintended effect of limiting Onvia's ability to use its NOLs. "Onvia's Board of Directors, after consultation with its legal and financial advisors, unanimously determined that these expressions of interest are not in the best interest of Onvia or its stockholders," said Van Skilling, the Chairman of the Board of Onvia. "In making its determination, Onvia's Board considered Onvia's significant and unrealized growth potential and the increased likelihood of such potential being realized as Onvia's new CEO, Hank Riner, begins to execute on his turnaround plan. As such, Onvia's Board believes that the interests of Onvia's stockholders would better be served by having the opportunity to benefit from the upside inherent in Onvia rather than pursue expressions of interest that undervalue Onvia and that are timed to be opportunistic so as to transfer to an acquiror the unrealized growth potential inherent in Onvia without adequately compensating Onvia's stockholders." Onvia does not expect to disclose any further detail or developments with respect to these expressions of interest unless, and until, any such expressions of interest were to lead to a definitive transaction that was approved by Onvia's Board or as otherwise required by law.
Onvia's ability to benefit from its tax assets would be substantially limited by Section 382 if a 50% "ownership change" occurred. A company experiences a 50% "ownership change" for tax purposes if the percentage of stock owned by its 5% stockholders (as defined for tax purposes) increases by more than 50 percentage points over a rolling three-year period. The tax benefits preservation plan is intended to reduce the likelihood of an unintended 50% "ownership change" occurring through the buying and selling of Onvia's common stock.
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