IPS Corporate Actions: WFD Corp Acquisition & Demerger

Document created by Jenn Koek Employee on May 30, 2018Last modified by Jenn Koek Employee on Jun 13, 2018
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SUMMARY OF EVENTS

 

Unibail Acquisition

https://www.asx.com.au/asxpdf/20180412/pdf/43t55lknkwm4jb.pdf

 

Key Dates:

Event

Date

Effective Date

30th May 2018

Record Date

1st June 2018

Implementation Date

7th June 2018

 

Consideration:

The Unibail acquisition of Westfield shares will consist of both Cash and Scrip consideration:

US$2.67 and 0.01844 new Unibail-Rodamco shares (x 20 = 0.3688 CFD’s URW.ASX) for every 1 Westfield (WFD.ASX) share held.

Additional Notes:

  • The USD/AUD exchange rate was announced by Unibail on the 7th June 2018 as US$1.00 to AU$1.316616. Therefore, the AUD cash consideration received is AU$3.51536.
  • 1 Unibail-Rodamco CFD controls 20 Unibail stapled shares that Westfield holders are entitled to receive.

 

Rounding:

  • Cash rounding will be rounded down the nearest whole cent.
  • Allocation of Unibail CFDs will be rounded down to the nearest whole number of shares.

 

 

OneMarket Demerger

https://www.asx.com.au/asxpdf/20180412/pdf/43t55nflqr0v55.pdf

 

Key Dates:

Event

Date

Effective Date

30th May 2018

Record Date

1st June 2018

Implementation Date

7th June 2018

Dispatch of SSF Proceeds

31st July 2018

 

Consideration:

1 OneMarket share (OMN.ASX) for every 20 Westfield (WFD.ASX) share held. Rounded up to the nearest whole number.

Consideration from the demerger will be paid via a Distribution. Where the Distribution exceeds A$150,000,000, then this excess will be paid as a Capital Reduction.

 

NOTE: The amount of the Distribution will not be known until after the Demerger Implementation Date. This value will be calculated using a 10-day VWAP once OneMarket shares commence trading.

The Distribution will not be paid in cash. Rather, the proceeds will be applied to the purchase of the OneMarket share allocation.

 

Share Sale Facility

Shareholders who hold fewer than 10,000 Westfield shares as at the Demerger Record Date, and do not wish to receive OneMarket shares can elect to participate in the Sale Facility. When electing to participate, the OneMarket shares are transferred to a sale agent to proceed with the sale facility and forward the cash proceeds.

 


 

TAX IMPLICATIONS

The following provides the tax implications as per interpreted by IPS. To determine the best practice for tax and reporting requirements appropriate for your individual business, we strongly suggest you seek independent tax advice.

 

Unibail Acquisition

The tax implications are based on that expressed in the Westfield Scheme booklet: https://www.asx.com.au/asxpdf/20180412/pdf/43t55lknkwm4jb.pdf

 

A class ruling has been lodged for this event, and will be issued by the ATO in due course. Should any deemed treatments change as a result of the subsequent class ruling, the existing event will be adjusted in IPS.

 

Westfield Structure and Scheme Implications

Unibail-Rodamco will be listed in Australia as a CDI. This instrument will be a stapled security, comprising of:

  • 1 Unibail-Rodamco share
  • 1 NewCo Class A share

 

The Scheme Consideration received is apportioned across the 3 components of the Westfield security. This is indicated as appropriate by the ATO as:

  • WFDT = 45.8%
  • WAT = 32.8%
  • WCL = 21.4%

 

Rollover Relief is only available for the WCL share component. The ATO does not deem rollover relief available for the disposal of WFDT and WAT components.

 

The date of acquisition for CGT purposes generally for the Newco Class A Shares and New Unibail-Rodamco Shares will be the Implementation Date. Noting that where rollover relief is chosen for the WCL portion, then the deemed acquisition date for the corresponding portion of Unibail shares will be taken to have been acquired at the time the source-WCL shares were acquired.

 


 

IRESS Structure for Stapled Security Instruments

The holding of WFD stapled security in IRESS is held as one listed instrument. IPS does not segregate the WFD security into the underlying assets of WAT, WFDT and WCL. The new allocation of Unibail CFD will also be a stapled security. However, as with WFD, IPS will only record URW.ASX as one singular listed instrument, and will not report the underlying share constituents.

 

The reason being, all transactions and corporate action activity will occur against the ASX listed URW asset. The ATO does state that the total capital proceeds received for the disposal of a New Unibail-Rodamco CDI will need to be apportioned between each CHESS Depositary Interest in respect of New Unibail-Rodamco Shares and Newco Class A Shares. However, URW security is listed as one singular asset on the ASX, and as such, the disposal of each underlying asset will also occur simultaneously.

 

This treatment matches that of the share registry which also records the income payments centrally along with a single annual tax statement issued under the listed URW security. This is used for tax component calculation and upload at the parent listed asset level. The income information reported to IPS clients, therefore matches that provided by the share registry (i.e. same security code and number of distributions paid).

 

The result is that the combined tax components provided through the IPS income templates, will match the total of the split-out components attached to the underlying assets. This will therefore provide an equivalent effect for tax reporting on income. Since the resulting income and component totals are identical, this is considered an acceptable method for reporting.

 

IRESS Event Handling for the Unibail Scheme

IRESS has assessed the impact of providing rollover relief for the Unibail scheme, and has made the decision that rollover relief will NOT be supported for this event.

Given the complex nature of the existing WFD security structure, and the fact that 78.6% of the instrument is not eligible for rollover relief, IPS has taken the majority approach in not providing the rollover option.

Other key points for this decision include:

  • IPS corporate actions is designed to calculate everything at a full parcel level. Therefore, it is not possible to automatically (and accurately) attribute the partial rollover treatment against the same tax parcels.
  • Rollover relief is not mandatory, but rather a choice for shareholders to elect. Whilst this is certainly an option where shareholders are able to choose rollover – given minimal price fluctuations of WFD since the last restructure, IPS anticipates that any capital gains realised for majority of holdings would be minimal.
  • Even if the IPS scheme event could decipher between the two treatments (rollover and non-rollover), there are potentially 9 transactions that would need to occur for the event to be accurately completed in IPS, against every existing tax parcel.
  • It is observed that majority of shareholders hold multiple (and small) amounts of WFD tax parcels. Given the above point, there is potential for a large increase in the number of transactions that would need to occur in the overall position – and this would impact standard IRESS transaction and performance reporting.
  • Given the split between rollover and non-rollover, plus the likelihood of many positions consisting of multiple tax parcels, there is a risk of rounding inconsistencies across calculated positions, which will require a lot of manual intervention from clients

 

Unibail Sale Facility

Please note that any fractional Unibail entitlements are expected to be paid out in cash. The corporate action event that will be provided by IPS at a master level will not cater for this cash payment, and it is recommended to load these cash payments as uploads to reflect the cash transaction received (unless you have already received a Cash datafeed transaction).

 

The reason being is that the only way to achieve this result is to:

  • Generate fractional entitlements of the Unibail allocation (i.e. rounding turned off on the incoming Capital template), and;
  • Create a separate Share Sale Facility event with a fixed volume of 1, and a Renounced condition to sell down this fraction.

 

The issue with this method however is that this will likely result in many underlying tax parcels with fractional entitlements which will require a lot of manual intervention to match-off the correct fractional sale.

 

 

Onemarket Demerger

The tax implications are based on that expressed in the Westfield Demerger booklet: https://www.asx.com.au/asxpdf/20180412/pdf/43t55nflqr0v55.pdf

 

A class ruling has been lodged for this event, and will be issued by the ATO in due course. Should any deemed treatments change as a result of the subsequent class ruling, the existing event will be adjusted in IPS as such.

 

Demerger tax relief is NOT available for this event. As a result, any capital gains or assessable income that arises from the demerger cannot be disregarded.

 

The Demerger Distribution can consist of one or more components:

  • Demerger Dividend: the demerger dividend will be unfranked (declared as Conduit Foreign Income). Westfield shareholders who receive the demerger dividend must include the amount in their assessable income.
  • Capital Reduction: should there be any capital reduction (i.e. the excess has been reached), the capital reduction should not be treated as a dividend for income tax purposes. The cost base and reduced cost base of WFD should not fall below zero. If any amount exceeds zero, then a capital gain will arise.

 

 

The full demerger distribution proceeds are to be allocated to the OneMarket shares received. Therefore, the Cost Base and Reduced Cost Base of OneMarket allocation will be equal to the distribution proceeds. For CGT purposes, the OneMarket share allocation will be treated to have been acquired on the Demerger Implementation Date.

 

Share Sale Facility

Any capital gains will not be eligible for discount, as the OneMarket shares would have been held for less than 12 months.

 

 

EXECUTING THE EVENT

Please execute this event in the order outlined below.

 


STEP ONE: DEMERGER

First apply the demerger event:

 

30-May-18 – WFD.ASX - Demerger of Westfield Group @ 1:20 Onemarket Limited shares (OMN.ASX)

 

This will create the new position in OneMarket (OMN.ASX) using the Implementation Date (settle date) of 31st May 2018; and will reduce the cost of the existing WFD position (for any capital reduction amount announced by Westfield).

 

The values used in this event are:

  • OMN acquisition price $1.39, being the price on acquisition date 7th June 2018.
  • WFD income rate (with Return of Capital component) of $0.0695, being $1.39 / 20).

 

NOTE: this price has been calculated on a reasonable basis, using OMN opening price. Should a confirmed price be confirmed by WFD or the ATO, this rate will be adjusted accordingly.

 

 

 

STEP TWO: ACQUISITION

Next apply the scheme event. This will sell all eligible positions in WFD, realising a capital gain/loss based on the announced value of the scheme consideration v’s the reduced cost of WFD (i.e. after the demerger has been completed).

 

When Unibail-Rodamco completed the acquisition, they did so in 2 stages:

  1. Allocate 0.01844 stapled shares for every 1 WFD held (rounded down).
  2. Then converted this to the final URW.ASX CDI instrument of 0.3688 (being 0.01844 x 20 CDI)

 

Therefore, we have provided two options to execute this scheme. Please refer to the option that best suits your needs, and execute based on the instructions below.

 

OPTION A – NO ROUNDING

This option directly allocates 0.3688 URW.ASX, rounded down to the nearest full share; i.e. bypassing the rounding between Unibail shares allocation and the conversion to CDI.

 

This option will result in less transactions being generated to reflect the scheme. However, depending on your original source holding, you may find rounding discrepancies with the final allocation of URW.ASX. To cater for this, intervention would be required to manually adjust any URW allocations directly on the resultant transaction to correct this rounding. This can be done by manually modifying each individual transaction, or using a Transaction Upload.

 

Please execute the full scheme event in the following order, using Ren% 0:

  1. 30-May-18 – WFD.ASX - Acquisition of Westfield Group @ USD 2.67 + 0.01844 Uni-Rod & 1:20 OMN Shares – Pt 1 
  1. 30-May-18 – WFD.ASX - Acquisition of Westfield Group @ USD 2.67 + 0.01844 Uni-Rod & 1:20 OMN Shares – Pt 2

 

OPTION B – ROUNDING

This option takes an addition step to the above, by rounding the original allocation of Unibail shares prior to the 20:1 conversion to URW.ASX.

 

This option will provide more accuracy in the final allocation of URW.ASX, however there will be additional scheme transactions visible within the position as a result.

 

To execute this option, please run in the following order, taking note of the instructions:

  1. 30-May-18 – WFD.ASX - Acquisition of Westfield Group @ USD 2.67 + 0.01844 Uni-Rod & 1:20 OMN Shares – Pt 1

NOTE: execute this option using Ren%100.

 

  1. 30-May-18 – WFD.ASX - Acquisition of Westfield Group @ USD 2.67 + 0.01844 Uni-Rod & 1:20 OMN Shares – Pt 2

NOTE: execute this option using Ren%0.

 

  1. 1-June-18 – URW.ASX - 20:1 Reconstruction of URW Shares (in lieu of Westfield Acquisition)

NOTE: execute this option using Ren%0.

 

 

STEP THREE: SHARE SALE FACILITY (Optional)

If you also participated in the Share Sale Facility, then apply this event last (i.e. after the demerger event has first been applied):

31-Jul-18 – OMN.ASX – Small Parcel Share Sale Facility in lieu of WFD Demerger 

NOTE: final price will be attached to this event once this has been announced after the 31st July 2018. Until then, the sale price remains at zero.

 

FAQ

 

What if I have subsequent matched sales of WFD? Can I still execute the Scheme events?

Yes, you can still execute the events, however you must first unmatch the subsequent sale transactions in WFD.

 

What values have been used when calculating the scheme’s cost split?

The first leg of the scheme event has been designed to reduce the cost of the existing WFD position (by the value of the URW allocation), and then allocate URW using this same value. This value become the cost base of the new URW allocation.

The remaining cost of the existing WFD position is then used in the second leg of the event to calculate any capital gain/loss against the capital proceeds (AU$3.51536) received.

The initial scheme values have been calculated by IRESS on a Reasonable Basis. This has been calculated using security opening values as at the implementation date of 7th June.

  • URW - $14.46 per CDI, being the opening value as at 7/6/18.
  • WFD – ($5.332848), being $14.46 x 0.3688 ratio.

 

What Demerger values have been used?

Until the final demerger details have been provided by the company, this has been provided by IRESS on a Reasonable Basis. This has been calculated using security opening values as at the implementation date of 7th June:

  • OMN Capital - $1.39, being the opening value as at 7/6/18.
  • WFD Income - $0.0695, being $1.39 x (1/20).

Once the final demerger values have been announced by the company, these values will be updated in the existing demerger event.

 

Will I be notified of any changes to the existing event templates?

Yes, any adjustments or changes will be announced in the Corporate Actions Weekly Modifications email.

 

Will I need to reapply the event if the values have been updated?

Yes, if the confirmed values differ to what IRESS has provided above, then you will need to reverse and re-execute the event in full. To do this:

  1. Reverse the event in full, in the order of last template to the first template.
  2. Then re-execute the event in full, in the order of first template to the last template.

If unsure, please refer to the Event Execution Instructions on the correct order of executing the event in full.

 

Will IPS update the event after the ATO class ruling has been released?

Yes, if it is deemed the ATO class ruling differs to the values or treatments IPS has provided, then the existing Corporate Action event will be modified to reflect these changes.

If the event is modified, this update will be announced in the Corporate Actions Weekly Modifications email. We will also update this document to specify any updated treatments as a result to the ATO Class Ruling.

NOTE: If you then wish to reflect any updated ATO class ruling treatments, then you would need to reverse and re-execute the event.

 

How to I apply the OneMarket Share Sale Facility?

Once you have applied the initial Demerger event, there will be a separate event available under OMN.ASX:

31-Jul-18 – OMN.ASX – Small Parcel Share Sale Facility in lieu of WFD Demerger

Please note however that this event does not currently contain a sale price as this has not yet been announced to market. Once in place however, this event will be updated.


I am having issues with rounding of my final URW.ASX allocation?

This is likely due to the rounding that Unibail completed between the allocation of Unibail shares, and the URW.ASX CDI’s. Please read through the Event Execution Instructions on how to correct this.

 

 

What if I do want to reflect Rollover Relief?

If you would prefer to reflect full rollover relief, we could assist you with creating a customized event directly on your site to cater for this. Please contact IPSCorpActions@iress.com.au if you wish to proceed with this.

 

Alternatively, if you do have a requirement to reflect the partial rollover relief treatment, then this would need to be manually handled directly on your site. To do this, you would need to manually calculate your cost base splits, and then replicate the transactions outlined above. This can be done using Transaction upload.

Please note however, the impact of this would result in multiple transactions which could potentially include the following (depending on your deemed tax requirements):

  • Rollover Relief handling for 21.4%
  • Non-Rollover Relief handling for 78.6%

 

 

ROLLOVER RELIEF:

 

Part One:

  • CAPITAL SALE: disposal of WFD at cost
  • CAPITAL PURCHASE: to apportion the cost-base split against the original position of WFD and newly acquired URW:
  • WFD at split cost (cost base split TBC)
  • URW at split cost (cost base split TBC)

 

Part Two:

  • CAPITAL SALE: WFD using confirmed AUD rate for cash consideration received (US$2.67)
  • CASH: the confirmed AUD rate for the cash consideration received (US$2.67)

 

 

NON-ROLLOVER RELIEF:

  • CAPITAL SALE: Disposal of each WFD share held at a value comprising of:
  • Confirmed AUD rate for cash consideration received (US$2.67)
  • Deemed value of URW security received (being the closing VWAP value of URW upon listing)
  • CAPITAL PURCHASE: Acquisition of URW on the basis of 0.01844 URW for every 1 WFD share held (rounded down). The Tax, Trade and Settle date of URW will be provided as the Implementation date of the Scheme.
  • CASH: the confirmed AUD rate for the cash consideration received (US$2.67)

 

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