Wyeth – Pfizer merger

 

For Wyeth shareholders this is a completely taxable transaction. As such it should be entered as a sale of Wyeth and then a purchase of Pfizer shares. For tax purposes, the holding period for Pfizer will start on the merger date not the Wyeth purchase dates.

 

1.) The total proceeds of the Wyeth “sale” has three components:

              A = Fair Market value (FMV) of Pfizer whole shares received

              B = Cash received as part of the merger agreement

              C =  Cash-in-lieu of fractional Pfizer shares.

              Total proceeds then = A+B+C

 

2.) How to calculate A, FMV of Pfizer shares received.

              The exchange ratio was 0.985 Pfizer shares per Wyeth share owned.

                            (Wyeth shares owned ) x 0.985 =  Pfizer shares entitled

                            Truncate this number to only whole shares. Ignore the fractional share part at

this point. Fractional share value will be determined later.

              The closing share price of Pfizer on the merger date was 17.66

(Whole shares of Pfizer received) x 17.66 = FMV of Pfizer shares received

 

3.) How to calculate B, cash received from the merger consideration.

              Multiply Wyeth shares owned by $33.00

              (Wyeth shares owned) x $33.00

              Your broker statement should also include this amount.

 

4.) How to calculate C, cash-in-lieu of fractional Pfizer shares.

              Use the fractional share part of your calcualtion in part 2 above.

              Multiply this fractional share by $16.836. This price is the weighted average price of

Pfizer on the merger date.

              (Pfizer fractional share) x $16.836 = cash-in-lieu for Pfizer fractional share.

              This cash-in-lieu payment should appear on your broker statement. Some brokers may

mischaracterize the payment as a dividend or other income.

 

5.)  Enter the sale of Wyeth using the total proceeds received from Pfizer (A+B+C) as the entry in the sale total box of the sell transaction screen. The date of the merger was October 15, 2009.

 

6.) Enter the Pfizer buy transaction using the FMV of Pfizer whole shares received calculated in part 2 above as the entry in the Net Total of Purchase box of the buy transaction screen. Also date this transaction October 15, 2009

 

If you want access to the Pfizer statements on this merger you can go to

General info - http://media.pfizer.com/files/investors/shareholder/Pfizer_WyethProxy_TaxImplications.pdf

FAQ - 

http://media.pfizer.com/files/investors/shareholder/Pfizer_Wyeth_FAQ.pdf