Intercontinental Exchange (ICE) completed its merger with NYSE Euronext (NYX) on 11/13/13. The SEC filing for this merger (S-4/A filing of 4/30/13) was found in the Investor Relations area of the Intercontinental Exchange web site. Final proration amounts were from an ICE press release dated 11/1/13.
Entering the transaction:
This merger gave NYX shareholders choices:
a.) to receive only cash for the merger
b.) to receive only stock of ICE for the merger
c.) to receive a combination of cash and ICE stock.
All three options will be covered here.
If you decided to receive cash only (option a), treat this merger as a sale. The selling price will be the total cash received minus any reorganization fees. This option will not be discussed further.
If you chose option b, due to proration considerations, this merger is a cash plus stock reorganization.
If you chose option c, this is a cash plus stock merger.
All the information below is from the information available from the S-4/A filed with the SEC and ICE press releases.
The rest of this article will deal with option b and c. First, if you have made any entries for this transaction in the Club Accounting software, you should delete them.
To record this merger will require multiple entries in the accounting software. The basic outline of these entries is given below:
Enter a large Return of capital transaction to have the program calculate the capital gain reportable for this merger.
Write down the capital gains, both long-term (LTCG) and short-term (STCG).
Delete the large Return of capital entry.
Enter capital gain distributions for the LTCG and STCG.
Enter a smaller Return of capital for the remainder of the cash received.
Enter the actual merger transaction
The capital gain realized is limited to the actual cash received so some clubs may need to adjust the capital gain amounts before entering the capital gain distributions. Instructions for doing this are included. The total merger consideration depends on your option. For option b the total consideration is $45.163 per NYSE Euronext share. For option c, the total consideration is 45.099. The difference is due to the mix of stock and cash and the change in the price from the proration date and the completion date. Your capital gain will be based on this total consideration with a limit that the total capital gain can not exceed the total cash received, excluding cash-in-lieu of fractional shares.
1. Calculate the capital gain.
If you have a copy of Microsoft Excel, we strongly suggest to download a spreadsheet made to help with this sort of transaction, from our web site at:
https://www.iclub.com/downloads/Gain Calculator Merger with Cash.xlsx
The total merger consideration is $45.163 per NYSE Euronext share for option b. This is $11.154 in cash and $33.945 in Intercontinental Exchange shares. Calculate the total value received for your NYSE Euronext shares by multiplying the total value received per share by the total shares of NYSE Euronext owned. For option b, the total value per NYSE share is $45.162. For option c, the amount is $45.099.
Option b Total Proceeds = [45.163 x (# of NYSE Euronext shares owned)] – (Reorg fee)
Option c Total Proceeds = [45.099 x (# of NYSE Euronext shares owned)] – (Reorg fee)
The result of your calculation is the total proceeds on which capital gain from this merger will be calculated.
If you have only one block (purchase) of NYSE do the following:
Enter the total proceeds amount in the dividend entry screen. Change the “type” to Return of capital. Date the transaction 11/13/13. The security is NYSE Euronext. Save the transaction.
The program will change some of the Return of capital, if appropriate, to LTCG and STCG.
Look at your transactions history and WRITE DOWN the amount for LTCG and STCG.
If the total capital gain is less than the cash received for this merger, leave this transaction.
After you have recorded these amounts if your capital gain was greater than the cash received, delete the Return of capital transaction. Although the LTCG and STCG entries were generated by the Return of capital entry you may need to delete them separately in the program.
If you have multiple purchases of NYX, the capital gain must be calculated on each block of NYX purchased. To do this multiply the total value received per NYSE by the number of shares in a block. Subtract the cost basis of this block from the value received for this block to find the capital gain for this block. Compare the purchase date to 11/13/13 to see if the gain is long-term or short-term. Add all the long-term gains using only blocks with a gain, ignore blocks with a loss. Repeat this for the short-term gains. Remember, you can not include any block with a loss in these calculations. Cost basis of each block can be found in the accounting program by entering a mock sale. Indicate you are selling less than your total position. This will cause a block selection screen to appear as you proceed. The cost basis and purchase date for all blocks will appear on the block selection screen. Write down this information and then cancel the sell transaction.
Next you need to compare the sum of the capital gains to the total cash received, excluding cash for fractional shares.
The total cash received should be [11.154 x (# of NYSE Euronext shares held)] – (Reorg fee) for option b.
The total cash received should be [11.27 x (# of NYSE Euronext shares held)] – (Reorg fee) for option c.
A spreadsheet will be available to assist in the process if you have multiple blocks.
If your total capital gains are less than or equal to the total cash received, then skip to Accounting for Cash Received.
If you gains are greater than the cash received, then continue with this section to adjust your capital gains so they are equal to your total merger cash received.
Since the structuring of this merger limits your capital gains to the cash received you need to adjust your gains to the total cash received. If you have only one block of NYX shares then the adjustment is simple, your gain is either one long-term gain or one short-term gain equal to the total cash received. Use the Cash dividend entry screen to enter this capital gain distribution. Change the “type” field to the appropriate capital gain type.
If you have multiple blocks of NYX the adjustment should come by decreasing the gain from any block whose capital gain is greater than the cash received for that block to be equal to the cash received. For example, you have a block of 100 shares of NYX. You chose option c and would receive 1127.00 in cash for these shares. Your capital gain calculation gave a gain of 1450. Since the gain is greater than the cash received, reduce the gain from this block to 1127. Repeat this process for each block. Next add all the adjusted gains as done earlier, adding only positive gains. Losses may not be included. When the gains have been adjusted, use the Cash dividend entry screen to enter the appropriate capital gain distribution type and amount. With multiple blocks you may need to enter amounts for both long-term gain and short-term capital gain distributions. A spreadsheet is available to help with these calculations.
2. Accounting for Cash Received
All of the following entries use the cash dividend screen, in CA3 this is Transactions > Cash Dividend or Distribution, and online at Accounting > Cash Dividends.
Date these transactions 11/12/13
The security should be NYSE Euronext
Change the “type” field to Long-term capital gain.
The Amount field should be your LTCG as calculated above.
Next repeat the process for your short-term capital gain.
Change the “type” field to Short-term capital gain.
The Amount field should be your STCG as calculated above.
Finally, enter a return of capital entry.
Change the “type” field to Return of capital.
The Amount field should be: (Total Cash received) – (LTCG + STCG)
If your LTCG + STCG = Total Cash Received, no return of capital entry is needed.
Continue to step 3, The Merger.
3. The Merger
Go to Transactions > Merger or Accounting > Securities > Record merger of securities depending on the version of the software being used. If you are unfamiliar with merger transactions you can get help at this URL:
https://www.iclub.com/support/kb/default.asp?page=normal_merger
Here is the information you need to complete the merger.
Date: 11/13/13
Old Security or Merging Company: NYSE Euronext (NYX)
Price per share of old Security / NYSE Euronext: Use the last valuation price
Cash received: See your broker statement for cash-in-lieu
New Security: Intercontinental Exchange (ICE)
Shares received: .1712 x (# of NYSE Euronext shares owned) Option b
.1703 x (# of NYSE Euronext shares owned) Option c
(Remember to include fractional shares.)
Price per Share New Security: 198.645 (Opening price on 11/13/13)
Save the transaction and this is finally done.
A worksheet is provided below to record the items that need to be calculated. Some amounts have been rounded, share ratios to the nearest .0001 shares and cash to the nearest $.00. The spreadsheet that is available can use the full amounts which are listed at the end of the worksheet.
A. Total Proceeds received.
Option b 45.163 x (# of NYSE Euronext shares) = ____________________________
Option c 45.099 x (# of NYSE Euronext shares) = ____________________________
B. Total cash received.
Option b [11.154 x (# of NYSE Euronext shares)] – (Reorganization fee) ______________
Option c [11.27 x (# of NYSE Euronext shares)] – (Reorganization fee) ______________
Large Return of Capital (ROC) entry amount is equal to A.
C. LTCG = _____________________ (record your adjusted gain)
D. STCG = ____________________ (record your adjusted gain)
E. LTCG + STCG = __________________. Is this greater than B, Total cash received?
F. Return of Capital amount = (Total Cash Received) – (LTCG + STCG) = ______________
Use this if (LTCG + STCG) is less than Total Cash received.
G. Shares of Intercontinental Exchange Received (For the merger transaction)
Option b 0.1712 x (# of NYSE Euronext shares owned) = _________________.
Option c 0.1703 x (# of NYSE Euronext shares owned) = _________________.
Non-rounded cash and share ratios
Option b 0.171201 shares ICE and $11.154424 per NYX share
Option b 0.1703 shares ICE and $11.27 per NYX share
