bebe stores, inc. Adopts Tax Benefit Preservation Plan

Category:

Tuesday, January 16, 2018 4:09 am PST

Dateline:

BRISBANE, Calif.

BRISBANE, Calif.--(BUSINESS WIRE)--bebe stores, inc. announced today that its Board of Directors has adopted a tax benefit preservation plan to help preserve the value of its net operating losses and other deferred tax benefits.

The tax benefit preservation plan was adopted to protect an important bebe asset that may have meaningful value to all bebe stockholders. The value of these tax benefits would be substantially limited if it were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code. In general, an ownership change would occur if stockholders that own (or are deemed to own) at least five percent or more of the outstanding bebe common stock increased their cumulative ownership in bebe by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The tax benefit preservation plan reduces the likelihood that changes in the bebe investor base would limit future use of its tax benefits, which would significantly impair the value of the benefits to all stockholders. bebe believes that no ownership change as defined in Section 382 has occurred as of the date of this press release.

The Board of Directors adopted the tax benefit preservation plan after considering, among other matters, the estimated value of the tax benefits, the potential for diminution upon an ownership change and the risk of an ownership change occurring.

As part of the plan, the bebe Board of Directors declared a dividend of one preferred stock purchase right, which are referred to as “rights,” for each outstanding share of bebe common stock. The dividend will be payable to holders of record as of the close of business on January 26, 2018. Any shares of bebe common stock issued after the record date will be issued together with the rights.

The rights will be exercisable if a person or group, without the approval of the bebe Board of Directors, acquires, or obtains the right to acquire, beneficial ownership of 4.99% or more of bebe common stock. The rights also will be exercisable if a person or group that already beneficially owns 4.99% or more of bebe common stock, without approval of the bebe Board of Directors, acquires additional shares of bebe common stock (other than as a result of a dividend or a stock split). Existing bebe stockholders that, as of January 26, 2018, beneficially own in excess of 4.99% of the common stock will be “grandfathered in” at their current ownership level. If the rights become exercisable, all holders of rights, other than the person or group triggering the rights, will be entitled to purchase bebe common stock at a 50% discount. Rights held by the person or group triggering the rights will become void and will not be exercisable.

Beneficial ownership of shares is calculated under the plan in accordance with the applicable rules of Section 382 of the Internal Revenue Code. The calculations are complex, and stockholders should contact bebe if they have any questions regarding their ownership, the 4.99% trigger amount or any other matters related to the plan.

The bebe Board of Directors has established procedures by which it will consider requests by stockholders to exempt certain acquisitions of bebe common stock from the plan if the Board of Directors determines that doing so would not limit or impair the availability of the tax benefits or is otherwise in the best interests of bebe.

The rights will expire on January 12, 2028. The rights may also expire on an earlier date upon the occurrence of certain events, including a determination by the Board of Directors that the tax plan is no longer needed to preserve the tax benefits because of legislative changes or if the Board determines that the tax benefits have been fully used or are no longer available under Section 382 or that an ownership change would not materially impair or limit the tax benefits. The plan was not adopted as an anti-takeover measure and once the deferred tax assets have been fully used, the Board of Directors intends to terminate the plan. The rights may also be redeemed, exchanged or terminated prior to their expiration.

The distribution of the rights is not taxable to stockholders. The rights will initially trade together with bebe common stock and the bebe Board of Directors may terminate the plan or redeem the rights prior to the time the rights are triggered. Further details about the plan will be contained in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission by bebe.

Lake Street Capital Markets, LLC is acting as financial advisor to bebe with respect to the adoption of the tax benefit preservation plan.

Forward Looking Statements

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected. The statements in this news release, other than historical information, contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ from anticipated results. Wherever used, the words “expect,” “plan,” “anticipate,” “believe” and similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties and the company's future results of operations could differ materially from historical results or current expectations, as described in the Company's annual report on Form 10-K and/or other filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement.

Contact:

bebe stores, inc.
Manny Mashouf, 415-715-3900
President and Chief Executive Officer