We received the proxy in the mail and have tried reading the book - but a 3-way takeover? And what does the company do after the takeover?What are the markets served?What are they projecting earnings to be?Other than making the investment less comprehensible, what goes on?Howie52This increasingly looks like something individual investors should run away from.
This is a proxy for a special shareholders' meeting to appove a merger. Mine hasn't arrived yet but I'm not surprised it's complicated. Much different than the typical annual meeting proxy.
Proxy arrived today. Almost 500 pages. Only scanned it briefly but a few initial thoughts.How I vote my 2300 shares won't affect the outcome of the merger vote at all. But the merger might affect my wallet.Everything I've read from the financial community says this is a good move for the company. Were it a run of the mill merger I'd vote for it. But it isn't. A new, Dutch, company will be created from the former US and Japanese companies. And for US holders of current AMAT shares it's going to be a taxable transaction. Red flag!I hold my 2300 shares in an IRA so the above taxable transaction shouldn't affect my taxes. I'll have 2300 shares in the new Dutch company. But then there is the warning that dividends from that company may trigger tax withholding by the Dutch. Another red flag! Foreign withholding on dividends paid in an IRA either can't be recovered or may be very difficult to recover. There are lots of caveats about regulators approval being required on various issues and no guarantees current investors will get favorable rulings. Another red flag! We're going to vote on this without a lot of important facts.So now I'm focused not on the merger but on how it will affect my shares, my taxes, and my ability to receive future dividends in full in my IRA. I'll keep reading and researching but I'm also considering other actions rather than just accepting the new merger company shares. I could sell covered calls to realize some income now and just let the stock be called away later at a higher strike price than today's market. And if it isn't called I could still sell before the merger completion. That may be the easiest move but it could also lock me out of future appreciation in a good company I've owned for a long time. I'll keep researching. No need to make a hasty decision now.
Thanks for pointing out that this merger will trigger a taxable stock sale. I hold some shares of AMAT with a nice long-term capital gain. I can deal with the "forced" sale that will occur due to the merger leaving me with new shares of HoldCo. If I'm interpreting correctly the text below, the only downside is that my long-term position will be converted to a short-term position for tax purposes, with the new cost basis stepped up to the date of the merger.Are there additional taxes in this situation that I may not be aware of? That might make me want to liquidate before the merger; otherwise, it seems relatively neutral for a long-term buy-and-hold investor. NR-------------------------------Relevant text from Form S-4:Material U.S. Federal Income Tax Consequences of the Applied Merger to Holders of Applied Common Stock U.S. Holders The receipt of HoldCo ordinary shares for shares of Applied common stock pursuant to the Applied Merger will be taxable to U.S. holders for U.S. federal income tax purposes. Similarly, the receipt of cash for shares of Applied common stock (1) by any dissenters who exercise appraisal rights or (2) by stockholders who would otherwise receive fractional shares, will be taxable for U.S. federal income tax purposes. As a result, a U.S. holder should recognize gain or loss equal to the difference, if any, between (1) the sum of the fair market value of the HoldCo ordinary shares at the time of the Applied Merger and the amount of any cash received, and (2) the U.S. holder’s tax basis in the shares of Applied common stock surrendered in the exchange at the time of the Applied Merger. A U.S. holder’s tax basis in the shares of Applied common stock generally will equal the holder’s purchase price for such shares. A U.S. holder’s gain or loss on the receipt of HoldCo ordinary shares and cash (if any) for shares of Applied common stock generally will be capital gain or loss. Capital gains of non-corporate U.S. holders will be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. holder has held his or her shares of Applied common stock for more than one year at the effective date of the Applied Merger. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder will generally be treated as U.S. source gain or loss. If a U.S. holder acquired different blocks of shares of Applied common stock at different times or different prices, such U.S. holder must determine its tax basis and holding period separately with respect to each block of Applied shares. If a U.S. holder of Applied common stock also owns, actually or constructively, a percentage of TEL’s common stock that is equal to or greater than the percentage of Applied’s common stock that the U.S. holder owns, actually or constructively, it is possible that such U.S. holder may be required to recognize an amount of income as a result of the Applied Merger up to the full fair market value of the HoldCo ordinary shares to be received by the U.S. holder, without regard to the U.S. holder’s basis in the shares of Applied common stock exchanged therefor, and that such income may be treated as ordinary dividend income and not as capital gain. Any such U.S. holders of shares of Applied common stock should consult their own tax advisors concerning the U.S. tax consequences to them of the Business Combination. A U.S. holder will have an aggregate tax basis in the HoldCo ordinary shares received in the Applied Merger that is equal to the fair market value of the HoldCo ordinary shares as of the effective date of the Applied Merger, and the holding period of such HoldCo ordinary shares will begin on the day after the Applied Merger becomes effective. Information returns may be filed with the IRS in connection with the Applied Merger. Backup withholding may apply to cash paid in the transaction to a U.S. holder (currently, at a rate of 28%), unless the U.S. holder furnishes a correct taxpayer identification number and certifies that he or she is not subject to backup withholding, typically on IRS Form W-9. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, so long as the required information is timely furnished to the IRS. U.S. holders are urged to consult their own tax advisors as to the particular consequences to them of the exchange of shares of Applied common
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