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MERGER: Florida Rock (FRK.N) and Vulcan Materials (VMC)
Issue:
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This is a revised article. Readers of the original should check this revision to
see if they should delete and edit their entries on this transaction.
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On 11/16/2007 Florida Rock Industries, Inc. and (FRK.N) and Vulcan Materials Company (VMC) completed a merger transaction?
Cause:
Shareholders of FRK.N were given three options for this reorganization:
1. Receive all cash.
2. Receive all stock.
3. Receive a combination of cash and stock.
Resolution:
Instructions for all of the above options can be found below. When you are through with the entries, you should change the name of Vulcan Materials Company to Legacy Vulcan Corp.
If you elected to receive all stock, you can treat this as an ordinary merger. Follow the directions at:
http://www.iclub.com/support/kb/default.asp?page=normal_merger
If you received all cash, you can treat this as an ordinary sale of your FRK.N stock for cash. Enter the sale as you would for the sale of any security.
If you received some cash and some stock, you will treat this as a cash plus stock reorganization, a type of transaction which has become more and more frequent in recent years, and which, unfortunately is quite complex.
All the information below is from the information available at the SEC web site:
http://www.secinfo.com/dsvr4.u9N1.htm
The company was forced to prorate elections to receive all cash, with the result that approximately 81.6% of those shares were redeemed for cash, and approximately 18.4% were exchanged for VCM stock. Since the company did not redeem fractional shares and sometimes rounded up and sometimes rounded down, it becomes necessary to compute the exact number of shares redeemed and the number of shares converted. The company paid $67.00 for each whole share of FRK.N redeemed, and issued .63 shares of VCM for each FRK.N share not redeemed. Cash in lieu of fractional shares of VCM was paid at the rate of $83.31 for each fractional share. The following items must be completed before entering this transaction.
A. Cash received, do not include cash in lieu of fractionsl shares __________
B. Reorganization fee charged by broker, if any ________________________
C. Net cash received [A minus B] ____________________
D. Shares redeemed [divide A. by 67] _______________
E. Original number of FRK.N shares held ___________________
F. FRK.N shares converted [E minus D] _____________________
G. Number of VCM shares received, including fractions [F times 0.63] ________________
H. Value of shares received [G times $83.31] ____________________
I. Merger consideration [C plus H] _____________________
J. Cost basis of FRK.N Stock [Take from Valuation statement prior to merger] _____________
K. Total gain [I minus J] ______________________
L. Reportable gain [K or C, whichever is less] ______________
M. Return of capital [C minus L] ____________ [positive figure only]
For a step-by-step of this procedure, I recommend printing out this sheet and filling out the blanks.
Step 1) If you entered any part of this merger transaction, including the reorganization fee, delete those transactions from the software.
Step 2) In the software, enter the Reportable Gain. If Item K, above, is negative, skip this step.
a) Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
b) Set Transaction Date to 11/16/2007
c) Set Transaction Type to Dividend or Distribution
d) Select your Cash Account.
e) In the Amount field, enter the Reportable Gain (Item K, above)
f) Set the Type to Short-Term or Long-Term Capital Gain. If you have held the FRK.N stock for over a year, the type will be Long-Term. Otherwise it will be Short-Term.
g) Set the Security to FRK.N
h) Click OK
Step 3) If Item M is zero, skip this step. Enter the cash received in excess of the reportable gain as a Return of Capital.
a) Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
b) Set Transaction Date to 11/16/2007
c) Set Transaction Type to Dividend or Distribution
d) Select your Cash Account.
e) In the Amount field, enter the balance of cash received in excess of the reportable gain (Item M, above)
f) Set the Type to Return of Capital
g) Set the Security to FRK.N
h) Click OK
Step 4) Record the Merger
b) At the top of the page, select TRANSACTIONS > MERGER
c) Set Transaction Date to 11/17/2007.
d) Transaction Type will already be set as MERGER.
e) Select the appropriate Cash Account - ie Broker, checking, etc.
f) Select Florida Rock Industries, Inc. under Select Old Security.
g) Set Old Security Price per share to zero (0).
h) Under CASH RECEIVED, enter the cash received IN LIEU OF FRACTIONAL SHARES, if any. Do not enter the ENTIRE amount of cash received.
Note: The cash received from the sale of a fractional share should be separate on your broker statement from the cash received. This "cash in lieu" comes from the fact that no fractional shares were issued in this transaction, and, thus, cash was paid instead. The program will sell the fractional portion of the total VMC shares for this amount.
i) Enter Vulcan Materials Company for New Security. [If Vulcan Materials Company is not available select NEW SECURITY and enter the data.]
j) In SHARES RECEIVED, enter ____________ from Item G, in the line with VMC.
k) Enter $83.31 for the price per share.
l) Click OK to complete the merger transaction.
Your transaction is complete!
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