Eaton Corporation (ETN) completed its merger with Cooper Industries (CBE) on 11/30/2012 for 39.15/share cash and .77479 shares of Eaton Corporation stock for each share of Cooper.
The SEC filing for this merger was originally posted on the sec.gov web site.
This merger is a cash plus stock reorganization. For tax purposes this merger is treated as a sale of Cooper Industries and part of the proceeds used to purchase Eaton Corporation. The total proceeds are equal to the cash received plus the fair market value of the Eaton shares received. Eaton Corporation estimated the fair market value of the Eaton shares as 51.9056 per share. This was calculated using a volume weighted average of shares sold on 11/30/2012. Since the company has given guidance on the price, their price will be used in the calculation in these instructions. All the information below is from the information available from the S-4 filed with the SEC and the guidance given by Eaton on their web site, https://www.eaton.com/Eaton/OurCompany/NewsEvents/Cooper/VolumeWeightedAveragePrice/index.htm.
As part of the merger, the new Eaton, PLC changed its country of domicile from the US to Ireland. The United States treats this as a sale of the US company and a purchase of the new company for tax purposes.
Eaton shareholders must treat this as a sale for $51.655/share of their Eaton holdings and then a purchase of Eaton, PLC for $51.655/share. The ratio of Eaton to Eaton, PLC was 1:1.
Number of Shares of Eaton recevied = (# of Cooper Industriesshares owned) X .77479
-Make sure to note the fractional shares.
Total merger consideration:
The Total merger considerationis $79.37 per Cooper Industries share.
This is $39.15 in cash and $40.22 in Eaton Corporation shares (51.9056 x .77479 = 40.215939824).
Calculate the total value received for your Cooper Industries shares by multiplying 79.37 by the total shares of Cooper Industries owned, and adding any cash in lieu:
[79.37 x (# of Cooper Industries shares owned)] + (cash-in-lieu).
This also gives the Gross Sale Total
Net Sale Total: This is the Gross Sale Total minus any Re-organization fee.
The accounting system will figure this out for you, but it's handy to have noted when working on this transaction.
Enter a sale transaction on11/30/2012.
Select Cooper as the stock to sell.
The sale amount will be the Gross Sale Total calculated from the previous section.
Use the Suspense account to receive the sale proceeds.
If your broker charged a Reorganization Fee include it as a commission or fee on the sale.
Transfer from the Suspense account, into the Broker account (or bank if appropriate), the Cash Received amount, as figured in part 1.
The transfer can be calculated as[39.15 x (# of Cooper Industries shares owned)] + (cash-in-lieu).
This transaction can also be dated 11/30/2012.
Enter a buy transaction for only the whole number of shares of Eaton received in this merger.
Date the transaction 11/30/2012.
The total purchase price will be the amount remaining in the Suspense account.
This amount should be:
The NetSale Total minus the Cash Received amount.
Save the buy transaction and the entries needed to complete this merger are done.