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Enzon Pharmaceuticals, Inc. (“Enzon” or the “Company”) (Nasdaq:ENZN) announced today that its Board of Directors (the “Board”) has adopted a stockholder rights plan (the “Rights Plan”) in an effort to preserve the value of its net operating loss carryforwards (“NOLs”) under Section 382 of the Internal Revenue Code (the “Code”).
Enzon’s use of its NOLs could be substantially limited if the Company experiences an “ownership change” (as defined in Section 382 of the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in Enzon’s ownership by “5% shareholders” (as defined in Section 382 of the Code) that increases by more than 50 percentage points over the lowest percentage owned by such shareholders at any time during the prior three years on a rolling basis. The Rights Plan was adopted to reduce the likelihood of an unintended “ownership change” occurring.
In connection with the adoption of the Rights Plan, on April 30, 2014, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock to the Company’s stockholders of record as of the close of business on May 14, 2014. After the Rights Plan takes effect, any person or group that acquires beneficial ownership of 4.99% or more of the Company’s common stock without approval from the Board would be subject to significant dilution in the ownership interest of that person or group. Stockholders who currently own 4.99% or more of the outstanding shares of Enzon common stock will not trigger the preferred share purchase rights unless they acquire shares representing a percentage of common stock that exceeds by 0.5% or more the lowest percentage of common stock that such stockholder had at any time since April 30, 2014. In addition, in its discretion, the Board may exempt certain persons whose acquisition of securities is determined by the Board not to jeopardize the availability to the Company’s NOLs or other tax benefits and may also exempt certain transactions.