Issue
I need to process the 2019 merger if Walt Disney Co with 21st Century Fox. How can I do this?
Background
On 20 March 2019, Walt Disney Company (NYSE: DIS) completed its US$71B acquisition of Twenty-First Century Fox Inc (21CF, NASDAQ: TFCF). The merger consideration consists of:
- the cash consideration of US$ 51.572626; or
- the scrip consideration of 0.4517 new Disney shares.
Immediately prior to the merger, 21CF did a spin-off of 26.3183% of its shares in a 3:1 exchange for FOX common stock, the remaining 73.6817% will be merged with Walt Disney.
Prior to the corporate action, Twenty-First Century Fox code (21CF) ticker code was (NASDAQ: TFCF or TFCFA); 26.3183% spin-off into Fox common stock with the new ticker code (NASDAQ: FOX or FOXA). It retained the name Twenty-First Century Fox throughout the corporate restructure.
This complex corporate action cannot be automated by Class as Twenty-First Century Fox is a foreign listed security. The manual steps are outlined below.
Resolution
To resolve this issue, you need to :
Step 1: Process a demerger of 21CF (NASDAQ: TFCF) into Twenty-First Century Fox Inc (NASDAQ: FOX) Shares.
Step 2: Process the 'Takeover/Merger - Scrip Component' with DIS
Step 3: Record Investment Income for the Fractional Entitlement
Worked Example
Smith Family SMSF currently holds 1,470 units of 21st Century Fox Inc shares (NASDAQ: TFCF), with a reduced cost base of $22,941.15
Process a demerger of 21CF (NASDAQ: TFCF) into Twenty-First Century Fox Inc (NASDAQ: FOX) Shares.
Navigate to Fund Level > Transactions > Investment - Corporate Action > Spin Off or Demerger
Calculate the number of FOX shares: 1470 / 3 = 490.
The above corporate action assumes demerger relief is available. If it is not, you can process the following transactions:
- Capital Return against previous 21CF (NASDAQ: TFCF) for $6,037.32;
- Purchase of new 21CF (NASDAQ: FOX) on 19/03/2019 for $6,037.32;
- Match the two transactions created above.
Process the 'Takeover/Merger - Scrip Component' with DIS
This transaction is processed on the basis that scrip-for-scrip relief is available:
The number of new DIS shares: 1,470 x 0.736817 x 0.4517 = 489
If you believe this corporate action is ineligible for the scrip-for-scrip rollover relief, you can process the following and select Without Rollover Relief:
489 x $110.71 (DIS share price) =$54,137.19.
Record Investment Income for the Fractional Entitlement
To record it as Taxable Foreign Income
Navigate to Fund Level > Transactions > Foreign Income
- Enter and select "Twenty-First Century Fox Inc" into Investment Account
- Select Taxable Foreign Income
- Enter the Dates, Trade Value and Foreign Tax Credits.
Example:
To record it as Capital Gain
- Process a Distribution - Cash event
- Process a Distribution - Tax statement event to pick up the whole amount as Capital Gain
Example:
