Energy Transfer Partners completed its merger with Sunoco on 10/5/2012. Sunoco shareholders were given 3 options, all cash, all ETP units or a 50/50 spit of cash and ETP units. If the all stock or all cash option was oversubscribed then the units or cash would be prorated among the shareholders. The all-cash option was oversubscribed. As a result Sunoco shareholders making the all-cash choice received a mix of cash and ETP units.
Before completing this transaction, our accounting advisor offers the following warning:
ETP is a publicly traded partnership. The accounting software is not designed to handle such investments. To accurately track partnerships requires more work for the treasurer. In addition, partnerships send out K-1s. These usually arrive later than the 1099s from brokers and are necessary to complete the club's tax returns.
Holding a partnership in your portfolio will probably delay filing your club tax returns. For instance, ETP indicates on their web site that electronic copies of K-1s will start to be available the week of Mach 4, 2013 for tax year 2012. Broker 1099s are required to be sent by Feb 15. Due to these factors we normally discourage clubs from holding partnerships in their portfolio.
With that in mind, following are the steps for entering this merger:
This merger is a simple merger if the all-units option was chosen. The all cash or mix of cash and units option will require a sell transaction followed by a simple merger. The proportion of Sunoco shares sold will depend on the option chosen. The information below is based on the information available from the S-4 filed with the SEC and subsequent press releases regarding the final proration for the all cash option. Price information is from websites offering historical prices.
Click HERE for the All Units Option
Click HERE for the All Cash or Mix of Cash and Units Option
The Merger Entry
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.asppage=normal_merger
Here is the information you need to complete the merger if the option to receive only ETP units was chosen.
(Remember to include fractional shares.)
For example, if you owned 100 SUN shares, you should receive 1.049 x 100 = 104.9 ETP units.
Save the transaction and the merger has been entered.
The All Cash and Mixed Options
The Sell Transaction
Here is the information you need to complete the sale portion of the merger if the all cash or mixed option was chosen.
Cash Option 53% of Sunoco shares held. If held 100, shares sell 53 shares.
(This is rounded up from 52.94%, sell 52.94 shares for more precision)
Sale Total: Check your broker statement.
For the mixed option the total should be near 25 x (# of total SUN shares)
For the all cash option the total should be near 26.47 x (# of total SUN shares)
Notice that for both options the cash is calculated using the total SUN shares held before the sale, not on the shares sold. The price per share for the shares sold should be near 50.
Commissions & Fees: If your broker charged a reorganization fees enter it here.
The All Cash and Mixed Options
The Merger Entry
Here is the information you need to complete the merger if the option to receive all cash or a mix of cash and units was chosen.
(Remember to include fractional shares.)
For example, if you owned 100 SUN shares before the merger, you should receive .5245 x 100 = 52.45 ETP units if you chose the mixed option.
If you owned 100 SUN shares before the merger, you should receive .49373 x 100 = 49.373 ETP units if you chose the all cash option.
Price Per Share: ETP opened at 42.14 and closed at 43.59 on 10/5/12.
This price is used as the starting point for ETP return calculations. It does not affect capital gain calculations. Chose a price or even take an average of the two.
Save the transaction and the merger has been completed.