Gastar Spooked by Takeover Threat Adopts Shareholder Rights Plan

According to a press release from Gastar Exploration, a driller with operations in both the Marcellus and Utica Shale plays (among others), the company is adopting a “tax benefit preservation plan to preserve valuable net operating losses.” What, exactly, does that mumbo jumbo mean? It appears to us that Gastar is very concerned that they either are, or will become, a takeover target. The company holds certain paper assets, including an accounting line called a “cumulative net operating loss carryforward” that can be used to reduce Gastar’s income tax bill (i.e. boost per-share value). Apparently a new “Shareholder Rights Plan” just adopted by Gastar will ensure that if the company is taken over, they can use the carryforward to benefit existing shareholders. Yes, it’s complicated and we don’t pretend to understand it all. Our takeaway is that Gastar is spooked that they are being targeted for a takeover, and the current board and management is acting to either prevent it, make it more distasteful (“poison pill”), or perhaps just acting to be sure they don’t lose their own shirts in a takeover or sale…

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