Celgene (CELG) and Bristol Myers Squibb (BMY) merger

Celgene (CELG) and Bristol Myers Squibb (BMY) merger

 

Bristol Myers Squibb (BMY) acquired Celgene (CELG) in a cash and stock deal. The stock included BMY stock plus a value rights issue trading under the symbol BMYRT. The SEC filing for this merger can be found at the Bristol Myers web site at:

http://d18rn0p25nwr6d.cloudfront.net/CIK-0000014272/920745a1-8967-4b08-8e2c-d7573b07ada0.pdf

This transaction has some uncertainties related to it. Please read the notes at the end of these instructions to be aware of these issues.

While the SEC filing stated the ticker symbol for the rights will be BMYRT a test of our price download for valuations does not recognize this symbol when these instructions were written. The possible variations, BMY.RT, BMY.R and BMYR also are not recognized as a valid ticker symbol. While you hold these rights manually entering a price for this security will be required, at least for some unknown period of time. The price quote site Bigcharts.marketplace.com does give a quote under the BMYRT symbol.

 

Resolution:

This merger is a cash-plus-stock reorganization. This is a fully taxable merger with cash. For tax purposes this is treated as a sale of Celgene for the value of the cash and securities received. Some of the proceeds from the sale (the value of the stock received) is used to purchase Bristol Myers Squibb and the value rights. All the information below is from the information available from the form S-4/A 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.

 

  1. Sell Transaction

The total merger consideration is $108.11per Celgene share. This is $50 in cash, $56.16 in Bristol Myers Squibb shares (1 x $56.16) and $1.95 in BMYRT rights (1 x $1.95). The opening price of Bristol Myers Squibb on the day of the merger completion date was $56.16. The opening price of BMYRT on the day of the merger completion date was $1.95.  Calculate the total value received for your Celgene shares by multiplying 108.11by the total shares of Celgene owned.

Total Proceeds = [108.11x (# of Celgene shares owned)] – (Reorganization fee).

For example, if you owned 100 CELG shares your total proceeds would be (10811.00 – Reorganization fee).

Use the Suspense account to receive the sale proceeds.

Date this transaction 11/20/2019.

 

  1. Transfer Cash Received

Transfer from the Suspense account to the Broker account (or bank if appropriate), all merger consideration cash received from this merger transaction. This will be the amount of the $50 per Celgene share minus any reorganization fee charged.  If your Suspense account balance was zero when you entered the sell transaction above, then the balance after transferring the merger cash received will be the total purchase price of the Bristol Myers Squibb shares you received in this merger. For example, if you owned 100 Celgene shares your cash portion of the merger consideration was $5000.00 – reorganization fee. ([50 x 100] –reorganization fee).

 

  1. Buy BMY Transaction

Enter a buy transaction for the number of Bristol Myers Squibb (BMY) shares you were entitled to receive in this merger. This will be 1 x (# of Celgene shares owned).  For example, if you owned 100 Celgene shares then enter 100 BMY shares purchased (1 x 100).

Date the transaction 11/20/2019.  The total purchase price should be 56.16  x ( # of Celgene shares owned). For example, if you owned 100 Celgene shares, then the total purchase cost would be 5616.00.

Choose the Suspense account as the source of funds for the purchase.  Save the buy transaction

 

  1. Buy BMYRT Transaction

Enter a buy transaction for the number of Bristol Myers Squibb value rights (BMYRT) you were entitled to receive in this merger. This will be 1 x (# of Celgene shares owned).  For example, if you owned 100 Celgene shares then enter 100 BMYRT rights purchased (1 x 100).

Date the transaction 11/20/2019.  The total purchase price should be (1.95  x ( # of Celgene shares owned). For example, if you owned 100 Celgene shares, then the total purchase cost would be 195.00.

Choose the Suspense account as the source of funds for the purchase.  Save the buy transaction.

 

 

 

  1. Fractional Share Sale

Any fractional shares received in this merger will likely be sold by your broker.

Enter a Sell transaction for the fractional shares dated 11/21/2019. The share amount will be the NON-whole part of the shares bought in the buy transaction above.  For example, if you owned 150.5 Celgene shares then you entered 150.5 Bristol Myers Squibb shares purchased. You would sell .5 Bristol Myers Squibb shares in this Sell transaction.   

The total proceeds will be the cash-in-lieu amount listed on your broker statement.

In this transaction you will have fractional share only if you owned fractional shares of CELG.

 

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For Myiclub.com users

 

  1. The CELG sale

Use the Merger with cash security transaction.

Step 1. Choose Celgene (CELG) as the merging company and date the transaction 11/20/2019.

Step 2.  Select the option Transaction is fully taxable. Enter the following additional information:

Cash per share received: 51.95 (Add the value of the rights to the cash received)

Exchange ratio:  1   to 1

Price per share of new shares: 56.16

Reorganization fee:  From your broker statement, if one was charged.

Symbol of new company: BMY

Cash received: Cash-in-lieu amount from broker statement.

Other fields should auto-fill from the information already entered.

This transaction will include a Buy of BMY with the sale of CELG

 

  1. Buy BMYRT Transaction

Enter a buy transaction for the number of Bristol Myers Squibb value rights (BMYRT) you were entitled to receive in this merger. This will be 1 x (# of Celgene shares owned).  For example, if you owned 100 Celgene shares then enter 100 BMYRT rights purchased (1 x 100).

Date the transaction 11/20/2019.  The total purchase price should be (1.95  x ( # of Celgene shares owned). For example, if you owned 100 Celgene shares, then the total purchase cost would be 195.00.

 

 

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. 

The future tax consequences of owning the BMYRT rights issue are unclear. The most likely outcome is they will be treated as any other security held for investment purposes, if they are sold before the rights mature and receive the cash payment associated with the rights. However, from the SEC filing for this transaction, if you receive cash from the trustee for the rights issue, such cash is likely to be treated as interest income. Unfortunately, the tax law on rights issues is not clear so there is no definitive answer to how such income will be treated.

Ticker symbol for rights issue - While the SEC filing stated the ticker symbol for the rights will be BMYRT a test of our price download for valuations does not recognize this symbol when these instructions were written. The possible variations, BMY.RT, BMY.R and BMYR also are not recognized as a valid ticker symbol. While you hold these rights manually entering a price for this security will be required, at least for some unknown period of time. The price quote site Bigcharts.marketplace.com does give a quote under the BMYRT symbol.