KB Home said its board approved changes to the company’s stockholder rights and successor rights plans aimed at reducing future tax liability and restricting future ownership changes at the Los Angeles homebuilder.
The so-called “poison pills” are similar to what was approved by Calabasas-based homebuilder Ryland Group Inc. last month. Poison pills typically prevent takeover attempts that are unwanted by managers. However, KB Home said a primary goal is to preserve the company’s tax benefits that are accruing now that the company is losing money.
Net operating loss carryforwards allow companies to apply current operating losses to future years’ profit to reduce tax liability. The company’s ability to use the carryforwards could be restricted if certain ownership changes occur, so the board’s plan includes restrictions on stockholder purchases.
KB Home said late Thursday that it has net deferred tax assets of approximately $880 million it believes could be used to potentially offset the income tax expense on approximately $2.2 billion of future taxable income for a 20-year period.
“Our net deferred tax assets represent a substantial potential benefit that can be realized as future income is generated,” said Chief Executive Jeffrey Mezger in a statement. “We are taking this step to preserve the long-term value of our net deferred tax assets.”
The plan would significantly dilute voting power for stockholders that increase their stakes above 4.9 percent of outstanding shares without approval of the board. For shareholders that already own more than 4.9 percent of shares, the dilutive trigger would only occur if they increase their stakes in the company. Formerly the threshold for triggering the plan was 15 percent.
The company said it intends to seek stockholder approval of the successor rights plan, which would expire on March 5, 2010 if not approved before then.
KBHome shares were down 6 cents, or less than 1 percent, to $11.19 in morning trading on the New York Stock Exchange. The price is down 61 percent from its 52-week high.
