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Tenet Healthcare Corp (NYSE:THC) Announces Shareholder Rights Plan

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More recently, Tenet Healthcare Corp (NYSE:THC) had approved a shareholder rights plan, which is launched to ensure that the Board can safeguard all shareholder interests as it implements the governance and leadership changes and as it assesses the best path forward for the firm. It is intended to safeguard the firm’s notable tax net operating loss carry forwards. The program is not planned to prevent any measure that the Board decides to be in the best stakes of the firm.

The details

At December 31, 2016, Tenet Healthcare’s federal net operating loss carry forwards were around $1.7 billion, before any taxable losses or gains that occurred this year including a taxable gain on the sale of the firm’s acute care hospitals and linked businesses in Houston on July 31, 2017.

At a tax rate of 35%, the NOL of $1.7 billion can generate cash tax savings of $600 million. An ownership change, under the tax code, could limit the firm’s ability to use its NOLs. An ownership change would happen upon a 50% change in stock ownership in a 3-year period by investors owning in surplus of 5% of the firm.

Under the rights program, if any entity or person buys a stake in 4.9% or more of Tenet’s outstanding common stock, holders of rights issued under this program will be entitled to buy shares at a 50% discount, or the firm may exchange each right owned by such holders for a share. Under the rights plan, any entity or person that currently owns over 4.9% of the firm’s outstanding common stock may persist to own its shares but may not buy a stake in any additional shares without causing the rights plan.

Following Tenet’s annual meeting of 2018, the Board will further assess the current need for the rights program at such time based on risk status to the firm’s NOLs. The rights offer may also be revoked prior to its planned expiration.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of MMJReporter.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure

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