Issue:
How do I enter the JDA Software and i2 merger?
Cause:
JDA Software and i2 merged operations. This merger was not a simple merger. For tax purposes shareholders of i2 are considered to have sold their i2 shares for the fair market value of the cash and JDAS shares. Also the holding period for JDAS shares will begin on the merger date, not the i2 purchase date as happens in simple mergers. Details can be found at the JDA Software web site listed below:
http://www.jda.com/company/press-release-details.html?ID=1938
Information can also be found in the SEC filing of the companies of form S-4 on numbered pages 59 and 60, total document pages 73 and 74. The S-4 filing can be found at the SEC web site at:
Resolution:
This merger is a cash plus stock reorganization, which is treated as a sale and re-purchase of the acquiring company. It is a taxable transaction. Due to the structure of the merger, the merger transaction in Club Accounting will not be used to enter this merger. Also, the normal way of treating cash-in-lieu of fractional shares received in a merger would not accomplish the tax consequences of this merger. Cash in-lieu will be treated as part of the imputed sale proceeds.
The first transaction to enter is a “Sell” transaction. Here is the information needed to enter this transaction:
Date: 1/27/2010
Account: Suspense
Security sold: i2
Shares sold: Sell all
Sale Total : 19.79 x (total of i2 shares owned)
For example for 100 shares of i2 enter the amount 1979 (19.79 x 100)
The second transaction is a transfer from Suspense to Broker (or Bank if appropriate)
Here is the information needed to enter this transaction:
Date: 1/28/2010
Transfer FROM Suspense TO Broker (or Bank)
Amount of Transfer: [12.70 x ( i2 shares sold)] + cash-in-lieu received
For example for 100 i2 shares you would receive 100 x 12.70 = 1270.
You would also receive 100 x .2562 = 25.62 shares of JDAS. You would receive cash
for the .62 shares of approximately 17.16. You would enter 1287.16 (1270 + 17.16)
The final transaction is a buy of JDAS. Here is the information needed to enter the buy.
Date: 1/28/2010
Account: Suspense
Security bought : JDAS
Shares bought: Enter the whole number only of .2562 x (i2 shares owned)
For example for 100 shares of i2 enter 25.
100 x .2562 = 25.62. Truncate to the whole number 25.
Net total of purchase: Use what remains in the Suspense account.
This works only if you had a zero balance in the account before the “sale” of i2.
If you had a balance in the Suspense account before the i2 “sale” then enter the
amount necessary to bring the balance back to what it was before the i2 sale.
When the program calculates the price per share, it should be about 27.68.
