Western Refining (WNR) acquired Northern Tier (NTI) in a transaction giving NTI shareholders a choice to receive all cash, all WNR shares or a combination of cash and WNR shares. Due to oversubscription, the all cash option was prorated so shareholders choosing that option received WNR share and cash. Instructions for all options will be included in this document. Most clubs will be in the default mixed option so those instructions will be first.
The SEC filing for this merger (S-4 dated 1/19/16) was found through the Investor Relations area of the Western Refining web site.
This merger is a cash plus stock reorganization, which are becoming more and more frequent in recent years. This is a fully taxable merger with cash. For tax purposes this is treated as a sale of Northern Tier for the value of the cash and stock received. Some of the proceeds from the sale (the value of the stock received) is used to purchase Western Refining. All the information below is from the information available from the S-4 filed with the SEC. The first instructions are for users of the desktop software, Club Accounting 3. Instructions for Myiclub.com users follow later in this document.
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1. Sell Transaction
The per share merger consideration is the total value of shares and cash received for each NTI share. It is different for the 3 options.
Mixed Option
Total Proceeds per share = $ 20.9003 per NTI share ($15 cash + 5.9003 in WNR stock)
Total sale proceeds = (20.9003 x # of NTI shares owned) – reorganization fee, if charged.
Use the Suspense account to receive the sale proceeds.
Date this transaction 6/23/2016.
All Shares Option
Total Proceeds per share = $ 13.9031 per NTI share ($13.9031 in WNR stock)
Total sale proceeds = (13.9031 x # of NTI shares owned) – reorganization fee, if charged.
Use the Suspense account to receive the sale proceeds.
Date this transaction 6/23/2016.
All Cash Option
Total Proceeds per share = $ 21.0668 per NTI share ($15.357 cash + 5.7098 in WNR stock)
Total sale proceeds = (21.0668 x # of NTI shares owned) – reorganization fee, if charged.
Use the Suspense account to receive the sale proceeds.
Date this transaction 6/23/2016.
2. Transfer Cash Received
Transfer from the Suspense account to the Broker account (or bank if appropriate), the net cash received from this merger transaction. This will vary with the merger option chosen.
Mixed Option
($15.00 x # of Northern Tier shares owned) – reorganization fee .
All Shares Option
This section does not apply as you received no cash.
All Cash Option
($15.357 x # of Northern Tier shares owned) – reorganization fee .
3. Buy Transaction
Enter a buy transaction for the number of Western Refining shares entitled to receive in this merger. This will vary with the merger option chosen.
Mixed Option
Shares purchased will be .2986 x (# of Northern Tier shares owned). For example if you owned 100 Northern Tier shares then enter 29.86 Western Refining shares purchased (.2986 x 100).
Date the transaction 6/23/2016. The total purchase price should be 19.76 x # of Western Refining shares purchased. The amount should be (.2986 x # of Northern Tier shares owned) x 19.76. For example, if you owned 100 Northern Tier shares, then the total purchase cost would be 590.03 (.2986 x 100 x 19.76). Choose the Suspense account as the source of funds for the purchase. Your Suspense account balance should be the same as before the initial Sell transaction of Step 1.
Save the buy transaction.
All Share Option
Shares purchased will be .7036 x (# of Northern Tier shares owned). For example if you owned 100 Northern Tier shares then enter 70.36 Western Refining shares purchased (.7036 x 100).
Date the transaction 6/23/2016. The total purchase price should be 19.76 x # of Western Refining shares purchased. The amount should be (.7036 x # of Northern Tier shares owned) x 19.76. For example, if you owned 100 Northern Tier shares, then the total purchase cost would be 1390.31 (.7036 x 100 x 19.76). Choose the Suspense account as the source of funds for the purchase.
Save the buy transaction.
If you were charged a reorganization fee, your Suspense account balance may be lower than before the initial sale in Step 1. Use a cash transfer from the broker to the Suspense account to balance the accounts.
4. Fractional Share Sale
The fractional shares received in this merger will likely be sold by your broker.
Enter a Sell transaction for the fractional shares dated 6/24/2016. The share amount will be the NON-whole part of the shares bought in the buy transaction above and will be different for each option. Examples for each option are listed below.
Mixed Option
Originally owned 100 NTI shares. Buy of WNR shares would be 29.86 shares. For the fractional share sale sell .86 shares. See broker statement for cash-in-lieu proceeds
All Shares Option
Originally owned 100 NTI shares. Buy of WNR shares would be 70.36 shares. For the fractional share sale sell .36 shares. See broker statement for cash-in-lieu proceeds
All Cash Option
Originally owned 100 NTI shares. Buy of WNR shares would be 28.896 shares. For the fractional share sale sell .896 shares. See broker statement for cash-in-lieu proceeds.
Use the Merger with cash security transaction.
Mixed Option
Step 1. Choose Northern Tier (NTI) as the merging company and date the transaction 6/3/2016.
Step 2. Select the option Transaction is fully taxable. Enter the following additional information:
Cash per share received: 15
Exchange ratio: .2986 to 1
Price per share of new shares: 19.76
Reorganization fee: From your broker statement, if one was charged.
Symbol of new company: WNR
Cash received: Cash-in-lieu amount from broker statement.
Other fields should auto-fill from the information already entered.
All Shares Option
Step 1. Choose Northern Tier (NTI) as the merging company and date the transaction 6/3/2016.
Step 2. Select the option Transaction is fully taxable. Enter the following additional information:
Cash per share received: 0.0
Exchange ratio: .7036 to 1
Price per share of new shares: 19.76
Reorganization fee: From your broker statement, if one was charged.
Symbol of new company: WNR
Cash received: Cash-in-lieu amount from broker statement.
Other fields should auto-fill from the information already entered.
All Cash Option (prorated so you received cash and WNR shares)
Step 1. Choose Northern Tier (NTI) as the merging company and date the transaction 6/3/2016.
Step 2. Select the option Transaction is fully taxable. Enter the following additional information:
Cash per share received: 15.357
Exchange ratio: .28896 to 1
Price per share of new shares: 19.76
Reorganization fee: From your broker statement, if one was charged.
Symbol of new company: WNR
Cash received: Cash-in-lieu amount from broker statement.
Other fields should auto-fill from the information already entered.
Note: In Merger with cash transactions, realizedcapital gains and the cost basis of the new shares have a component dependent on the price per share entered in the entry screens. In our experience brokers tend to use the price per share published by the companies on their websites in their guidance to shareholders. If the companies publish guidance with a share price, we use that share price in our instructions to minimize possible differences between the accounting records and broker information. In cases where no guidance is available, we will choose the lower of the opening or closing price on the effective date. Either of these prices is acceptable to the IRS and by choosing the lower price some realized capital gains will be deferred to a later date. However, there is always the chance the price we choose will not be the price chosen by your broker. The gain from the merger and cost basis of the new shares recorded in your accounting records will then differ from your broker information. Because of the lack of detail in the tax code, both our choice and your broker’s choice would be reasonable estimates of market value for the shares received. Your records are NOT incorrect because they differ from your broker. Tax return forms do have specific areas to report these usually small differences. Our tax printer software handles these adjustment entries automatically in the normal operation of the software.
