The board of directors at Gogo Inc. (Nasdaq: GOGO), a Chicago-based in-flight broadband connectivity firm with a major business unit headquartered in Broomfield, decided this week to adopt a shareholder rights plan known as a poison pill to help protect certain assets — namely tax breaks from large net operating loss carry-forwards — from potential hostile takeover.
The board’s decision comes just weeks after Gogo sold off its commercial aviation unit to Intelsat S.A. (OTC: INTEQ) for $400 million.
That unit provided wireless internet systems to airlines. The business aviation unit, which equips private planes with broadband, remains under Gogo’s control.
Gogo’s Broomfield office, home to about 300 employees, is the business aviation unit headquarters.
The Intelsat sale “will not have an impact on the Broomfield office, and we will not be folded into Chicago,” Gogo spokesman Dave Mellin told BizWest in an email Friday. “If anything, the headquarters for the business will likely move to Broomfield at some point in the future. The company will have a singular focus on the business aviation market servicing business aircraft.”
According to a regulatory filing, “As of Dec. 31, 2019, Gogo had approximately $580 million of federal tax [net operating loss carry-forwards, also known as] NOLs, $430 million of state tax NOLs and $196 million in federal interest expense carry-forwards that could be used in certain circumstances to reduce its future tax liability.”
That ability to apply NOLs to future tax liability could make Gogo attractive to a buyer who simply wants access to its tax assets without regard for shareholder value.
Under the poison pill plan, which must be approved by shareholders, “the board declared a dividend of one preferred share purchase right for each outstanding share of common stock,” filings show. “The rights will be exercisable only if a person or group acquires beneficial ownership of 4.9% or more of Gogo’s common stock. Gogo’s existing stockholders who currently beneficially own 4.9% or more of the common stock will be ‘grandfathered’ at their current ownership levels.”
Furthermore, “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,” Gogo said. “Rights held by the person or group triggering the rights will become void and will not be exercisable or exchangeable.”
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