Charter Communications (CHTR) merged with Time Warner Cable (TWC) effective 5/18/2016. This was a cash and stock merger.
The SEC filing for this merger can be found at through the Charter web site at:
https://ir.charter.com/phoenix.zhtml?c=112298&p=irol-sec&secCat01.2_rs=161&secCat01.2_rc=10&control_searchbox=&control_selectgroup=0 Select the DEFM14A dated 8/20/15. In addition a copy of IRS form 8937 can be found on the Charter web site at https://ir.charter.com/phoenix.zhtml?c=112298&p=irol-charter-twc-merger-materials . Scroll down the page to find the forms 8937.
This merger is a cash plus stock reorganization, which are becoming more and more frequent in recent years. All the information below is from the information available from the DEFM14A filed with the SEC and/or IRS form 8937.
The DEFM14A specifically states the tax situation for this merger is not clear. The cash received for TWC shares can be considered a partial redemption (sale) followed by a merger or it can be treated as a reorganization where gain but not loss is realized and gain is limited to the cash received. In their guidance the companies say they plan to treat this as a partial redemption. These instructions will follow that guidance. In addition, shareholders had a choice in the amount of cash received. Instructions for both choices will be included in this document. Please be aware that the IRS may challenge the interpretation of the companies and the characterization of this merger may change. It may be necessary to delete these transactions and enter this merger as a Merger with cash where gain is limited to the cash received.
We have also set up a short spreadsheet, to help with the calculations needed for this transaciton. It can be downloaded by clicking the following link:
https://drive.google.com/uc?export=download&id=0BzVysxBNwnZZOTFZRjktazBnS3M
1. Sell Transaction
A. A partial sale of TWC shares is entered first.
For shareholders opting to receive $100 per TWC share, the exchange ratio was .4891 Charter shares for each TWC. In this case you would be selling .5109 of your TWC shares. Since fractional shares you would be entitled to receive will be sold, and not distributed, increase your shares up to the next highest full share. If you owned 100 TWC shares, you would receive 48 shares of Charter in the merger; this is .4891 x 100 = 48.91 with .91 being sold and 48 shares distributed to you. For the partial sale you would sell 52 shares leaving 48 shares to go through the merger transaction. The proceeds from the sale would be (total TWC shares before merger x 100) + cash-in lieu received. If you owned 100 TWC shares before the merger and received 85.60 cash-in-lieu your sale proceeds would be (100 x 100) + 85.60 = 10,085.60.
Date this transaction 5/17/16, and choose Broker as the account to receive the money
B. If you chose the option to receive $115 per TWC share you would follow the same procedure as above, but a different total shares sold. In this case the exchange ratio was .4125. Multiply your total TWC shares by .4125. Keep only the whole number. Subtract this whole number from the TWC total shares. The result is the number of TWC shares to sell. Here is an example for 100 TWC shares. Charter shares distributed = 100 x .4125 = 41.25. Keep only the whole 41 shares. Subtract 41 from 100 to get the total TWC shares to sell, 100-41= 59. Sell 51 TWC shares. The total proceeds in this case equal (100 x 115) + cash-in-lieu received. If you owned 100 shares and received 45.80 cash-in-lieu your total sales proceeds would be (100 x 115) + 45.80 = 11,545.80.
Date this transaction 5/17/16, and choose Broker as the account to receive the money
2. Merger Transaction
The second part of the transaction is the merger. Fortunately, after the partial sale, the merger is a simple merger with you receiving 1 share of new Charter for each remaining share of TWC after the partial sale.
A. If you chose the $100 cash option:
B. If you chose the $115 cash option, you would merge your remaining 41 TWC shares into 41 CHTR shares.
Important Reminder:
The tax status of this merger is subject to change if the IRS challenges the company interpretation of the tax code as it relates to this merger. It may be necessary to change the entries for this merger at a later date.
For holders of Charter Communications before the merger.
For holders of CHTR before the merger, this merger is equivalent to a reverse stock split. The split ratio would be .905 for 1. (90.5 for 100).
