Enzon Pharmaceuticals, Inc. Adopts Tax Benefits Preservation Plan to Protect its NOL Assets and Shareholder Value

CRANFORD, N.J., Aug. 14, 2020 (GLOBE NEWSWIRE) -- Enzon Pharmaceuticals, Inc. (the “Company” or “Enzon”) (OTC:ENZN) today announced that its Board of Directors (the “Board”) adopted a tax benefits preservation plan (the “Section 382 Rights Plan”) designed to protect the availability of Enzon’s net operating loss carryforwards (“NOLs”) under the Internal Revenue Code (the “Code”).

As of December 31, 2019, Enzon had U.S. federal and state NOLs and tax credits, including approximately $101 million of U.S. federal NOLs, which may be available to offset its future taxable income. Enzon’s ability to use these NOLs would be substantially limited if it experienced an “ownership change” within the meaning of Section 382 of the Code. In general, an ownership change would occur if Enzon’s stockholders who are deemed to be owners of 5% or more of its shares under Section 382 collectively increase their aggregate ownership of Enzon’s common stock by more than 50% (measured over a three year period).

The Section 382 Rights Plan is intended to reduce the likelihood of such an ownership change at Enzon by deterring any person (or any persons acting as a group) from acquiring beneficial ownership of 4.9% or more of Enzon’s outstanding common stock or, with respect to any person (or any persons acting as a group) that as of today’s date already is a 5% stockholder, from increasing its ownership stake.

Under the Section 382 Rights Plan, the rights will initially trade with Enzon’s common stock and will generally become exercisable only if a person (or any persons acting as a group) acquires 4.9% or more of Enzon’s outstanding common stock. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount or Enzon may exchange each right held by such holders for one share of common stock. Under the Section 382 Rights Plan, any person which currently owns 4.9% or more of Enzon’s common stock may continue to own its shares of common stock but may not acquire any additional shares without triggering the Section 382 Rights Plan.

The Section 382 Rights Plan will expire on August 13, 2021, unless earlier terminated pursuant to the terms of the Section 382 Rights Plan. Under the Section 382 Rights Plan, the Board has the discretion to exempt any transaction and to exempt any person (or group of persons) from the provisions of the Section 382 Rights Plan.