Kinder Morgan completed its merger with El Paso Pipeline on 11/26/2014. EPB shareholders had a choice to take all cash, cash and Kinder Morgan stock or all Kinder Morgan stock.
The SEC filing for this merger (S-4A filing of 10/1/2014) was found in the Investor Relations area of the Kinder Morgan web site.
Though EPB shareholders had a choice of the merger consideration this merger is a fully taxable transaction. For tax purposes this is treated as a sale of El Paso Pipeline and the proceeds used to purchase Kinder Morgan. The sale proceeds are the sum of the market value of KMI shares received plus any cash received. All the information below is from the information available from the S-4 filed with the SEC.
1. Sell Transaction
If the all cash option was chosen, the total merger consideration is $39.53 per El Paso Pipeline share.
If the mixed option was chosen the total consideration is $43.2668 per EPB share. This is $4.65 in cash and $38.6168 in Kinder Morgan shares (40.86 x .9451). Calculate the total value received for your El Paso Pipeline shares by multiplying 43.2668 by the total shares of El Paso Pipeline owned.
If the all KMI shares option was chosen, the total consideration is $43.6935 per EPB share.
Because this option was oversubscribed, those choosing this option actually received 1.0527 KMI shares plus $.6802 cash per EPB share. The value is broken down into 43.0133 (40.86 x 1.0527) in KMI shares plus .6802 cash.
All cash option Total Proceeds = [39.53 x (# of El Paso Pipeline shares owned)] - (Reorganization fee, if any).
Mixed option Total Proceeds = [43.2668 x (# of El Paso Pipeline shares owned)] - (Reorganization fee, if any).
All share option Total Proceeds = [43.6935 x (# of El Paso Pipeline shares owned)] - (Reorganization fee, if any).
Use the Suspense account to receive the sale proceeds unless you chose the all cash option. Use the broker account in this case.
Date this transaction 11/26/2014.
2. Transfer Cash Received
Transfer from the Suspense account to the Broker account (or bank if appropriate), the cash received from the mixed option for this transaction. This will be of the $4.65 or $.6802 per El Paso Pipeline share depending on the option chosen. If your Suspense account balance was zero when you entered the sell transaction above, then the balance after transferring the cash received will be the total purchase price of the Kinder Morgan shares you received in this merger.
3. Buy Transaction
Enter a buy transaction for the full number of share you were entitled to receive in this merger. This will be either .9451 KMI shares per EPB share or 1.0527 KMI shares per EPB share depending on whether the mixed or all share option were chosen. Be sure to include the fractional shares.
Date the transaction 11/26/2014. The total purchase price should be (40.86 x # KMI shares received, including fractional shares). Save the buy transaction.
4. Sell Fractional Shares
Two of the options will generate fractional shares and cash-in-lieu received. Sell the fractional shares for the cash-in-lieu reported on your broker statement. Date this transaction 11/27/2014 or the date the cash was received in your account.
If your broker charged a reorganization fee you may have a negative balance in the Suspense account after the KMI buy. A transfer from the broker to the Suspense account will balance this and decrease your broker account by the amount of the reorganization. Accounting for the reorganization fee in this way (as a cost of the sale) decreases the gain from the EPB sale. This is more beneficial to club members than entering the fee as an expense.