How to handle the BHP (BHP:ASX) and Woodside (WDS:ASX) merger

BHP (BHP:ASX) and Woodside (Formerly WPL:ASX now WDS:ASX) announced on May 19th, 2022 that BHP’s acquisition of Woodside was approved.

For BHP shareholders, you’ll receive 1 WDS:ASX shares per 5.5340 BHP:ASX shares you hold. If you hold American Depositary Shares (ADS) in BHP, you’ll receive 2.7670 Woodside shares per 1 share in BHP you hold.

Follow the steps below for how to handle this in Sharesight:

  1. On your portfolio overview page, click the blue ‘Add New Holding’ button

  2. Select the ‘Opening Balance’ option, enter Woodside as the stock (WDS:ASX) and set the date to June 1st, 2022. If your portfolio is in an Australian Tax Residency, or you already own WDS shares prior to the merger, select a buy trade.

  3. Enter the units received as outlined above

  4. Enter your cost base as market value the market value outlined by BHP. This is $29.76 x Woodside units held

  5. Enter save to add your new Woodside shares to your portfolio

We’ve created a detailed article below on how to handle this in Sharesight:

Can’t use this method for portfolios that have an existing WDS holding. If you try to use the ‘Opening balance’ selection it refuses - because you already have an opening balance. If you try to use the ‘Buy trade’ selection then you end up with a cash transaction through your accounting system and also an ‘Unsettled trades adjustment’ in SS!

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For existing or previous holders of Woodside creating an Opening Balance is not possible.

Adding Woodside shares with a “Buy Trade” (as advised by Sharesight Support) creates incorrect portfolio performance figures and an incorrect cash transaction as it appears new funds have been contributed.

Please can we get a better solution?

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Having the same issue. Can’t enter an opening balance for WDS shares as I get an error message saying “You already have an opening balance trade recorded on 01 Jun 2016”.

Can someone from SS please respond to this?

Thanks

Should the be a reduction of the cost base of the BHP shares also?

The BHP website says that dividend statements will be released mid June 2022 so might need to leave it until then to obtain updated cost base information?

In the case you own WDS prior to this corporate action, you will enter a buy trade at the closing price of $29.76. This is taken off the market value of WDS as outlined before:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02527568-3A594746?access_token=83ff96335c2d45a094df02a206a39ff4

The above link has outlined a dividend component as well. We’ve updated our help page below for how to enter this. Because it’s not a dividend announcement, it won’t show in Sharesight automatically, so it’ll have to be entered manually:

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Why would you put in the market value as the cost base? There has been no outlay to obtain these new shares. Igf you did put in the market value as a cost base, then surely you would also need to take the same amount off BHP shares.

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I reckon what you have have posted a few minutes ago is just plain wrong. There is not an issue of shares “Alongside” an in specie dividend.

The issue of the shares IS the in specie dividend. There’s no cash element. But as the issue is treated as a dividend it will be 100% franked.

I have just put the new shares into Sharesight successfully by entering the number of shares, Price $0.00 and Nil brokerage. I was already holding WDS shares, so the overall cost base has been lowered marginally.

There will be an ATO ruling on how to handle it eventually… I am just going to add it in for reporting purposes and adjust later. Just add a div in BHP and new trade for WDS using the figures in the BHP announcements. Best we can do at this stage really.

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So the below link has more detail on what to do with the special dividend. You’ll find this on page 15 that you should include the income in your assessable income for the relevant tax year:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02508789-3A591484?access_token=83ff96335c2d45a094df02a206a39ff4

Page 18 of this same document outlines that the cost base for WDS is the market value at the date of the implementation of the merger. BHP have outline that this price is as below:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02527568-3A594746?access_token=83ff96335c2d45a094df02a206a39ff4

The listed advice is just based off what is coming out, but it’s great we have these discussions so we can get the best advice for how to handle this in Sharesight. It should be noted that this is just to show it in Sharesight, anything tax specific should be consulted with a tax professional

The BHP cost base will remain unchanged, outlined on page 15 as per below:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02508789-3A591484?access_token=83ff96335c2d45a094df02a206a39ff4

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thanks Jack

For those following this thread, I’ve updated the initial post as more information has been released for handling this one :pray:

So, in real terms …

  1. The new WDS shares that we each get are an fully franked in spei dividend from BHP at a price to be determined (possibly the opening price on 1 June - the date of issue?). How do we put this transaction into SS without creating a cash transaction that impacts linked accounting systems and also the SS ‘unsettled trades’ balance?

  2. The new shares appear in our WDS account. Do they appear at the value of the dividend and therefore make a realistic change to the cost-base (in as a dividend from BHP out as value received). If so, we have the same issue of causing a cash transaction in both our accounting systems and also in SS ‘unsettled trades’ balance. If we put them in at zero then we have an issue with recognising the value of the trade and its impact on the cost base - and overall portfolio.

Now, since these two transactions are for the same cash amount, we should be able to journal them away in our accounting systems but how do we get rid of the individual entries in SS’s ‘unsettled trades’?

… or am I way off here?

Thanks Jack - but introduces an errorr in the rounding if you simply apply a formula to the existing number of BHP shares held for both the dividend value and the franking credit. Better, I think, to work off the actual number of WDS shares received once rounded to the nearest share, calculate the value of the dividend from this @ $29.76 per share and calculate the franking credit for that dividend.

This is how I see it.

The following is from BHP’s news release yesterday:
"The closing price of Woodside shares on ASX on 31 May 2022 was A$29.761. The implied value of the in specie dividend was therefore A$27.2 billion (US$19.6 billion). At this valuation, the in specie dividend is approximately A$5.38 (US$3.86), with A$2.30 (US$1.66) of franking credits being distributed, per BHP share. "

This transaction is a Dividend paid to BHP shareholders by BHP. In this case, it is in specie, instead of cash, but is a dividend nevertheless. There is no cash outlay by investors who receive the WDS shares this way. Therefore they should be added as a new holding at no cost if you did not already own WDS shares, or if you did already hold WDS shares, then it should be additional shares, added, again at no cost and no brokerage. In the latter case, this will have the effect of marginally reducing the overall cost of your grossed up WDS holding.

At the same time, the dividend should be recorded as income on your BHP holdings at the rate of $A5.38 per share, Fully Franked at the rate $A2.30 per share.

Makes sense Phil but isn’t the issue then that you have no balancing cash transaction to net off fin your accounting system? Given that it is a cashless deal, as soon as you recognise the dividend as income you have to have another cash transaction to set it of in the accounts. Or am I mistaken? Have you found a way around this?