Benzinga | Dec 20, 2021 09:16AM EST

Navient Adopts Short-Term Shareholder Rights Plan With 20% Trigger

The Board of Directors of Navient Corporation (NASDAQ:NAVI) has adopted a shareholder rights plan (the "Rights Plan") and declared a dividend distribution of one preferred share purchase right on each outstanding share of Navient common stock. The Rights Plan is designed to protect shareholder interests by reducing the likelihood that any person or group would gain control of Navient through the open-market accumulation of the Company's shares without appropriately compensating Navient's shareholders for control. In adopting the Rights Plan, the Board noted, in particular, the recent stock activity and the accumulation of a substantial economic position in the Company by entities associated with Sherborne Investors Management LP.



"Navient is committed to engaging in constructive dialogue with all of our investors and we welcome their perspectives," said Jack Remondi, president and CEO, Navient. "We also want to ensure investors are able to realize the full long-term value of their investment and receive fair and equal treatment, which is what the Rights Plan is designed to do."

The Rights Plan is not intended to prevent or interfere with any action with respect to the Company that the Board determines to be in the best interests of stockholders. Instead, it will position the Board to fulfill its fiduciary duties on behalf of all shareholders by ensuring that the Board has sufficient time to make informed judgements about any attempts to control the Company. The Rights Plan will encourage anyone seeking to gain a controlling interest in the Company to negotiate directly with the Board prior to attempting to control the company.

The Rights Plan treats all shareholders equally and provides several recognized shareholder-friendly features, including a one-year term and an exception for fully financed, all-cash offers that are open for at least 60 business days. The Rights Plan has a 364-day term, expiring on December 19, 2022, though the Board may consider whether to terminate the Rights Plan earlier if circumstances warrant.

The rights will be exercisable only if a person or group acquires beneficial ownership of 20% or more of Navient common stock (including certain derivative positions), subject to certain exceptions. If a shareholder's beneficial ownership of Navient common stock as of the time of this announcement of the Rights Plan and associated dividend declaration is at or above 20% (including through entry into certain derivative positions), that shareholder's existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after this announcement, the shareholder increases its ownership percentage by 0.001% or more. Each right will entitle shareholders to buy one one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $100.

If a person or group acquires beneficial ownership of 20% or more of Navient outstanding common stock (subject to the grandfathering provision described above), each right will entitle its holder (other than such person or members of such group) to purchase for $100, a number of Navient common shares having a market value of twice such price. In addition and subject to the grandfathering provision described above, at any time after a person or group acquires beneficial ownership of 20% or more of Navient outstanding common stock (unless such person or group acquires 50% or more), Navient's Board of Directors may exchange one share of the Company's common stock for each outstanding right (other than rights owned by such person or group, which would have become void).

Prior to the acquisition by a person or group of beneficial ownership of 20% or more of the Company's common stock (subject to the grandfathering provisions described above), the rights are redeemable for $0.01 per right at the option of the Board.

Certain synthetic interests in securities created by derivative positions -- whether or not such interests are considered to constitute beneficial ownership of the underlying common stock for reporting purposes under Regulation 13D of the Securities Exchange Act -- are treated as beneficial ownership of the number of shares of the Company's common stock equivalent to the economic exposure created by the derivative position, to the extent actual shares of the Company's stock are directly or indirectly held by counterparties to the derivatives contracts.

The dividend distribution will be made on December 30, 2021, payable to shareholders of record on that date, and is not taxable to shareholders.