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Merger Royal Dutch Shell & BG Group

On February 15th, 2016 Royal Dutch Shell plc announced that the BG Group plc is now owned by Shell. In accordance with the terms of the deal, BG Shareholders on the register at 6.00pm on February 12th, 2016, who made no valid election under the Mix and Match Facility, will receive 0.4454 New Shell Shares and 383 pence in cash for each BG Share held. The closing price of Shell on February 12th was 1525p.

See the following link for more information: http://www.shell.com/investors/news-and-media-releases/recommended-cash-and-share-offer-for-bg-group-plc-by-royal-dutch-shell-plc.html

In the following example, it will be assumed that 1,000 BG Shares were bought for 1000p. To enter this merger into timetotrade, click on the 'share reorganisation' button:

Shell BG Merger 1.PNG

Set the date of the transaction to the 12th of February 2016:

Shell BG Merger 2.PNG

Select BG.L from the list of shares held:

Shell BG Merger 3.PNG

Select 'Merger' from the 'Type of reorganisation':

Shell BG Merger 4.PNG

Enter the Merger details for the new Shell shares received i.e.

  • 0.4454 RDSA.L (Shell Shares) for every 1 BG.L shares
  • The Shell share price on February 12th at 1525p, which is entered as £15.25
  • The cash received e.g. 383p x 100 shares = £383

Please note that it is important to enter the Shell Share price on the date of the transaction in order to apportion cost to the cash received if the cash value is considered 'large', as discussed in: https://wiki.timetotrade.eu/Take-overs_%26_Mergers

If the cash settlement is classified as "small" then the base cost of the original BG share holding is reduced by the cash amount and the tax liability is deferred until the shares are disposed of. If the cash is classified as "large cash", then there is deemed to have been a disposal and as such there is an immediate tax liability. In such an instance, to calculate your tax liability it is necessary to allocate a cost to the cash settlement. The cost is apportioned to the cash received in proportion to: the value of the cash divided by the sum of the value of the cash plus the value of the associated shares, on the effective date of the merger, i.e. the cost is allocated in proportion to = (value of the cash settlement) / (value of the cash settlement + market value of the shares received). This is automatically calculated if the Cash Value and Shell Share price is entered.

Shell BG Merger 5.PNG

The result is transfer of the cost of the existing holding to the new holding:

Shell BG Merger 6.PNG

If for example 1,000 shares where purchased rather than 100, the cash received would be considered Large Cash as 383p x 1,000 shares = £3,830, which would have cost apportioned to it as per the following processed example:

Shell BG Merger 7.PNG

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