MERGER/SPINOFF: Quanex Corporation

Issue:

Quanex Corporation just went through a complicated spinoff and merger.

Cause:

In the spinoff, Quanex stockholders received one share of Quanex Building Products Corporation (NX) for each share of Quanex Corporation owned on the record date of April 23, 2008. In addition, Quanex shareholders of record received $39.20 per share in cash.

Resolution:

Unlike most mergers and spinoffs, this transaction was completely taxable. Support for this position can be found at the following link on page 116.
http://www.quanex.com/ns/Informationstatement.pdf

We will enter a sale of the old Quanex stock for an amount consisting of $39.20 times the number of old Quanex shares plus the fair market value of the new Quanex shares received. Quanex Building Products Corporation opened at $15.06 on the day after the merger/spinoff.

Since the new Quanex stock has the same ticker symbol as the old shares, it is necessary to edit the profile of the old Quanex stock. Make the ticker symbol for that stock NXOLD. Then, for each block of old Quanex stock held, we will enter a sale for the number of shares in that block for $54.26 a share [$39.20 + $15.06], as of 4/23/08. Then, again as of 4/23/08, enter a purchase for the new number of Quanex Building Products Corporation shares received for $15.06 a share. It will be necessary to enter this as a new security, with the symbol NX.

When you are through, your cash should have increased by $39.20 times the number of old Quanex shares received.