Question 1: Why isn’t Ramsay Healthcare’s (RHC) share price closer to the takeover bid price of $88.00?
Answer: Firstly, it is not a takeover – yet. It is an indicative offer with a number of conditions, including satisfactory due diligence (which has only just started). We have seen a number of “indicative offers” for companies in the last 12 months – about 50% never translate into a firm bid, so the market is pricing in this uncertainty. Secondly, the Ramsay Foundation owns about 20% of the shares – their position is not crystal clear, and any offer could only be successful with their support.
The actual offer price is more like $91.60 (because there are significant franking credits to be distributed), so you can see that if Ramsay is trading at about $83, the market is thinking there is a risk that the “takeover” might not eventuate.
Question 2: I am a BHP shareholder. How many Woodside shares will I receive when BHP “demerges” its oil assets?
Answer: You will get 1 Woodside share for every 5.534 shares you own in BHP, with fractions rounded down. For example, if you own 100 BHP shares, you will receive 18 Woodside Shares. 500 BHP shares, 90 Woodside shares; 1000 BHP shares, 180 Woodside shares.
Question 3: With the demerger, payment is being made by a special, fully franked dividend from BHP. In lieu of cash, I get Woodside shares. What are the tax consequences?
Answer: The special dividend will be about US$4.62 or A$6.22. It will be determined by reference to the closing Woodside share price on the ASX on 31 May. It will be fully franked, with franking credits of about A$2.66.
The special dividend (and franking credits) will be assessable income for tax purposes. Against this, you will have franking credits that will act as a tax offset, or if you are a low rate taxpayer, generate a tax refund.
Question 4: Will the cost price for my BHP shares, which is used to calculate capital gains tax if I sell them, change? What will be the cost price for the Woodside shares I receive?
Answer: There will be no change to the cost base of your BHP shares. If you purchased your shares at $30, the cost base after the demerger will still be $30.
The cost base for your new Woodside shares will be the special dividend you receive. On a per-share basis, this will be 5.534 times the dividend per share. The acquisition date will the payment date, which is expected to be 1 June.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.