Fidelity National Information Services completed its merger with WorldPay on 7/31/2019 for cash and FIS stock.
The SEC form S-4 for this merger can be found through the Fidelity National Information Services web site at:
Resolution: For WorldPay shareholders this merger is a cash-plus-stock reorganization. All the information below is from the information available from SEC form S-4.
First, if you have made any entries for this transaction in the Club Accounting software, you should delete them. These instructions are for users of Club Accounting 3, the desktop version of the software. Myiclub users can use the Merger with Cash transaction. Instructions for Myiclub users are after the instructions for Club Accounting 3 users.
To record this merger will require multiple entries in the Club Accounting 3 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.)
Enter capital gain distributions for the LTCG and STCG.
Enter a smaller Return of capital for the remainder of the cash received, if any.
Enter the actual merger transaction
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 $134.7493 per WorldPay 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.
The total merger consideration is $134.7493 per WorldPay share. This is $11.00 in cash and $123.7493 in Fidelity National Information Services shares. Calculate the total value received for your WorldPay shares by multiplying 134.7493 by the total shares of WorldPay owned. This must be done on a block by block basis.
Total Proceeds = [134.7493 x (# of WorldPay 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 WorldPay shares owned. From the total proceeds subtract the cost basis of that particular block. This will give you the gain for each block of WorldPay shares using the total proceeds. Ignore any blocks with a loss. The cost basis can be found by starting a partial sale of WorldPay. 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 [11.00 x (# of WorldPay 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 7/31/19.)
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 [11.00 x (total # of WorldPay shares owned)] – (sum of capital gains). This amount will be entered as a return of capital.
All of the following entries use the cash dividend screen, in CA3 this is Transactions > Cash Dividend or Distribution.
Date these transactions 7/31/2019
The security should be WorldPay
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.
Go to Transactions > 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.
A worksheet is provided below to record the items that need to be calculated.
134.7493 x (# of WorldPay shares in block) = ____________________________
[11.00 x (# of WorldPay shares in block)] = ________________
Use this if (LTCG + STCG) is less than Total Cash received.
Instructions for Myiclub Users
Use the Merger with cash transaction.
Date – 7/31/2019
Merging Company – WP (WorldPay)
Be sure to choose the option Transaction is taxable to a maximum of the cash received.
Cash per share received: 11.00
Exchange ratio of new to old shares: .9287
Price per share of new shares on merger date: 133.25
Reorganization Fee: See your broker statement
Symbol of New Company: FIS
Shares received and Price per Share should auto-fill from information above.
Cash Received: See your broker statement for cash-in-lieu amount
Note: In Merger with cash transactions, realized capital 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.