RRI Amends Shareholder Rights Plan To Protect Tax Benefit

RRI Energy Inc. (RRI) put a shareholder-rights plan in place Tuesday that should protect a tax-benefit tool if it discovers its merger of equals with Mirant Corp. (MIR) doesn't cause a ownership change.

RRI and Mirant's merger was designed to give neither company's investors a premium, as the two aim to reduce costs by combining corporate functions.

RRI previous expected the merger into GenOn Energy Inc. would cause an ownership change, limiting the amount of net operating losses it could use to reduce its tax liability after the deal, which is expected to close by the end of the year. Net operating losses can be used to offset future income-tax payments.

After a review of Securities and Exchange Commission filings and guidance from the IRS, RRI learned that the merger may not cause an ownership change, sparking the rights agreement amendment.

The new rights plan reduces the beneficial ownership trigger to 4.99% from 15% and exempts certain shareholders, such as pre-existing RRI shareholders with more than 4.99% stakes and GenOn holders with the same stake percentage as a result of the merger.

As a result of the amendment, the rights plan is now similar to tax benefit preservation plans adopted by many other public companies with significant net operating losses.

GenOn will analyze overlapping holdings after the merger and will redeem the rights agreement if it determines an ownership change has occurred.

RRI shares were down 0.3% at $3.57 after hours, following a 2.5% decline in the regular session. Mirant shares weren't active after closing down 2.7% to $10.08. The drop in both outpaced a broader market fall.

-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; [e-mail]