Meadwestvaco completed its merger with Rock Tenn to form WestRock on 7/1/2015 for WestRock stock or a combination of WestRock stock and cash.
The SEC filing for this merger (S-4/A filing of 5/18/2015) was found in the Investor Relations area of the WestRock web site.
If your club held Meadwestvaco prior to the merger, please see FAQ 434: WestRock merger for Meadwestvaco shareholders
This merger gave RKT shareholders a choice; receive only shares of WRK or receive only cash for RKT shares. If no choice was communicated, the all share option was the default. If your club chose the all share option this is a simple merger, detailed immediately below this section. If your club chose the all cash option, this is instead a merger+cash transaction, which requires some calculations outside of Club Accounting. This is a more complex transaction; instructions for this begin after the end of the basic merger steps.
All information in the following sections is based on the information available from the S-4/A filed with the SEC. Price information is from websites offering historical prices.
The Merger Entry for all share option
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.
Save the transaction and the merger has been entered.
The Cash and Share Option Entries
Remember, the steps below are only necessary if your club did NOT choose the all-share option (which was the default) for the merger.
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:
Calculate the capital gains, both long-term (LTCG) and short-term (STCG) on a block by block basis. Adjust for the structure of the merger (Gain can be no greater than cash received and losses may not be recognized.)
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 is $63.0247 per Rock Tenn share. Your capital gain will be based on this total consideration with a limit that the total capital gain cannot exceed the total cash received, excluding cash-in-lieu of fractional shares.
1. Calculate the capital gain.
The total merger consideration is $63.0247 per Rock Tenn share. This is $51.7514 in cash and $11.2733 in WestRock shares. Calculate the total value received for your Rock Tenn shares by multiplying 63.0247 by the total shares of Rock Tenn owned. This must be done on a block by block basis.
In order to get the information needed for each block, we suggest the following steps:
Start a new Stock Sale
Set the transaction date to one day prior to the merger.
Set the security to Rock-Tenn
Enter the number One for both Shares sold and Sale total
The Stock Withdrawal screen that appears will show information for each block of shares that the club owned at the time.
Copy the following information into our spreadsheet, or a separate piece of paper: Date purchased, Cost Basis, and Shares available.
Once the information is copied, click Cancel, to stop the sale.
If you are using our spreadsheet, enter the Reorganization Fee (if your club was charged one), and then fill in the Date, # of Shares and Cost for each block of shares. This will generate any required Capital Gain and Return of Capital numbers needed, and you can then move on to Section 2 Accounting for Cash Received. The rest of the steps in this section are only for members who are not using the spreadsheet.
Total Proceeds = [63.0247 x (# of Rock Tenn shares owned in each block)]. (Do this calculation for each block of shares.)
Write down the total proceeds amount on paper or spreadsheet for each block of Rock Tenn shares owned. From the total proceeds subtract the cost basis of that particular block. This will give you the gain for each block of Rock Tenn shares using the total proceeds. Ignore any blocks with a loss. The cost basis can be found by starting a partial sale of Rock Tenn. A block selection screen will appear with the date purchased, number of shares and current cost basis for each block. Copy this information then cancel the sale.
Next calculate the cash received for each block, for those blocks with a capital gain. The equation for this is [51.7514 x (# of Rock Tenn shares owned in each block)]. For each block compare the cash received for that block with the capital gain calculated previously for that block. The smaller of the numbers is your gain from that block. Remember to ignore any blocks with a calculated loss using the total proceeds equation. Once you have the adjusted capital gain for each block with a gain, which is the smaller of a) the cash received or b) the total proceeds gain, add all the gains from each block with a gain. This will be your total capital gain for this merger. Remember to differentiate between short term and long-term gains. (Check the purchase date of each block and compare it to the merger completion date of 7/1/2015.)
You should now have a figure for long-term and short-term capital gains recognized from this merger. If this amount is less than the total cash received, not including cash-in-lieu for fractional shares, then subtract the sum of your capital gains from the total cash received. This will be [51.7514 x (total # of Rock Tenn shares owned)] – (sum of capital gains). This amount will be entered as a return of capital.
2. Accounting for Cash Received
All of the following entries use the cash dividend screen.
Date these transactions 7/1/2015
The security should be Rock Tenn
Change the “type” field to Long-term capital gain.
Amount 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.
Amount should be your STCG as calculated above.
Finally, enter a return of capital entry, if needed.
Change the “type” field to Return of capital.
Amount 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
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.
Old Security or Merging Company: Rock Tenn (RKT)
Price per share of old Security / Rock Tenn: Use the last valuation price
Cash received: See your broker statement for cash-in-lieu
New Security: WestRock (WRK)
Shares received: .1856 x (# of Rock Tenn shares owned)
(Remember to include fractional shares.)
Price per Share of New Company : 60.74(opening price on 7/1/2015)
Save the transaction and this is finally done.