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MERGER - Schering-Plough and Merck
Schering-Plough
merger with Merck
Background:
This merger gives
Schering-Plough shareholders cash and shares of Merck. The cash
received is considered a redemption (sale) of a particular fraction
of each share. Because of this a Schering-Plough shareholder may
recognize a capital gain or loss on each block of Schering-Plough
shares held before the merger. The $10.50 per share in cash received
is for the sale of 0.4233 of each Schering-Plough share owned. The
remaining 0.5767 of each share is then exchanged for 0.5767 shares of
Merck.
How to Enter this
transaction in Club Accounting:
This transaction will
need to be entered in 2 parts, first as a sale of 42.33% of
Schering-Plough and then a merger of the remaining shares of
Schering-Plough into Merck.
Finding the number
of blocks and shares in each block – Note: If your club
only owned one block of Schering-Plough, you can skip this initial
step, and go to the section on entering the sale.
Unlike a regular sale,
this sale is a sale of 42.33% of every block of shares held. You will
need to find the number of shares in each block of Schering-Plough
shares owned. This can be done by entering a mock sale of less than
the total number of shares owned.
Begin by entering
sell transaction for Schering-Plough. So long as you have not
already made entries regarding this transaction, the date can be
left to the default used by the system for this part of the
transaction.
In the Shares
Sold field enter a number LESS than the total shares owned
Enter any number
greater then 1 in the Sale Total field.
Click the OK
or SUBMIT button.
A stock withdrawal
window will appear listing every block owned and the number of
shares in each block. Copy this information down.
Once you have the
information copied, Cancel out of the transaction.
The sale
–Depending on the number of blocks of Schering-Plough that the
club owned, the following set of transactions can be time consuming.
In light of this, a spreadsheet has been created, which can be
downloaded from our web site at:
http://www.iclub.com/downloads/ca3transactions/Merck merger calculator.xls
From the previous step
you found the number of shares in each block of Schering-Plough
shares. Multiply the number of shares in each block by 0.4233. The
result is the number of shares to be sold from each block. You can
double-check your total by multiplying the total shares held before
the merger by 0.4233. Write this information down.
Begin by entering
sell transaction for Schering-Plough on 11/02/09; this is one day
before the merger.
In the Shares
Sold field enter the total shares to be sold (.4233 x total
premerger shares owned)
In the Sale
Total field enter the result of (10.50 x total premerger shares
held)
Click the OK
or SUBMIT button.
A stock withdrawal
window will appear listing every block owned and the number of
shares in each block.
Using the
calculation from above (or from the spreadsheet) enter the
appropriate number of shares in the Shares Sold field for
each block. The number in the Shares Sold field should be
0.4233 x number in the Shares Available field. For example,
in a block with 100 shares available, the shares sold would be
42.33. If you held Schering-Plough in a DRIP you may want to round
the shares to be sold in each block to the number of decimal places
reported on your DRIP statements. If you round the shares to be sold
in each block, you may need to adjust the shares in the final block
entry to make the total equal the total entered in the sell
transaction window.
After
double-checking your work, complete the stock sale.
Adding Merck to your
list of Securities -
If
you are using Desktop Accounting, and have not already done so, take
the following steps to add Merck to your list of securities (Club
Accounting Online users can skip to the next section on entering the
merger):
In the left hand
column click Securities and choose Add New
Merck is a common
stock whose ticker symbol is MRK
Click
OK to
save the information.
The Merger –
First, calculate
how many shares of Merck you should receive. (This will be your
Shering-Plough shares held before the stock sale entered above,
multiplied by .5767)
Start a merger
transaction dated 11/03/09
Select
Schering-Plough as the Old or Merging Company. If you are using Club
Accounting online, also select one daughter company, and click
CONTINUE
Select the account
to receive any cash-in-lieu payments. Broker is most likely.
Enter the last
price per share for Shering-Plough in the field Old Security
Price per Share. For Club Accounting Online users, this will be
filled in automatically.
Find Merck under
the list titled Select New Security. If you are using Club
Accounting Online, simply enter MRK as the ticker symbol for the new
company
Enter the shares
of Merck received in the Shares Received box.
Remember to use the number of shares as calculated in Step 1 of The
Merger.
In
the Price Per Share
field enter the price of Merck. For the purpose of these steps, we
use the closing price for Merck on 11/3/2009, which was 30.67. If
your broker used a different price, use that instead.
Enter any
cash-in-lieu of fractional shares received. The amount should appear
on your broker statement. NOTE: Some brokers may characterize the
payment as a dividend. Do not enter it as a dividend.
Click OK or
SUBMIT, and complete the transaction.
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