writser Posted March 23, 2017 Author Share Posted March 23, 2017 As far as I know it is Citigroup. They told me this a few weeks ago: No formal announcement has been made with regard to the ALIOY ADR program. Typically, any spinoff share is sold and cash proceeds are paid the ADR holders. In the event of a tender, you may cancel your ADRs and tender your shares (at your own expense and effort) at any time. Once the offer becomes compulsory the depositary banks typically surrender their shares, distributing the cash proceeds to the respective ADR holders subject to a 5c cancellation fee. I haven't seen any formal announcent since. I sold my ADR's and bought common stock. Worst case Citi does not tender the underlying shares and the ADR's will be illiquid and trade at a discount after the tender offer. Then you would have to wait a few months for a squeezeout but you'll still be fine. I bought a couple of extra shares last week. Deal looks to good to be true but what do I know. Link to comment Share on other sites More sharing options...
GatorCapital Posted March 23, 2017 Share Posted March 23, 2017 writser, Thanks for the reply. So, by continuing to hold the ADR, I may not get ADR stub shares because the depository bank would sell any spin-off shares received? I would need to own the Swiss shares directly to receive the stub shares? Thanks again. Link to comment Share on other sites More sharing options...
writser Posted March 23, 2017 Author Share Posted March 23, 2017 Well, no formal announcement has been made afaik. Citi could either sell the spinoff in the market or spin off an ADR to exisiting ADR holders. If you want to know for sure you'd have to contact Citi again to see if they tell you anything new. Link to comment Share on other sites More sharing options...
indirect Posted March 31, 2017 Share Posted March 31, 2017 Market finally giving some value to spinout. ADR above buyout price of $70 Link to comment Share on other sites More sharing options...
Grox Posted April 28, 2017 Share Posted April 28, 2017 Anyone following recent selloff in ADRs? As far as I know (from Citi), ADRs will receive $70/sh (minus 0.05 fees) plus cash in lieu of Idorsia shares. No one (Citi, IR) been able to articulate to me, though, whether anything funky happens due to merger closing/squeeze out issues. You can see that the non-tendered Swiss shares have also sold off (ATLN vs ATLNEE). If it's just a matter of (possibly) delayed timing on ADR payout, then ~6% gross spread today is attractive Link to comment Share on other sites More sharing options...
benhacker Posted April 28, 2017 Share Posted April 28, 2017 On ALIOY, what about tax withholding? Does the ADR have to withhold on the squeeze out (the tendered shares DO NOT... but I think squeeze out does). I would imagine there would be a process through your broker to recover the tax withholding and/or claim on taxes... but I can imagine that may be some of the uncertainty. Did you call CITI directly? Contact? Link to comment Share on other sites More sharing options...
Grox Posted April 28, 2017 Share Posted April 28, 2017 I called Citi directly just found a # for ADRs group on website (212-723-5435). Done some more digging - I've now been told they don't know what resolution is, yet, for ADR holders, and they should know next week. My guess - the "$70 + cash out newco shares" guidance they gave is just what's typical in these situations...but not official. Don't know about withholding taxes or how it would be calculated. Link to comment Share on other sites More sharing options...
Hielko Posted May 1, 2017 Share Posted May 1, 2017 On ALIOY, what about tax withholding? Does the ADR have to withhold on the squeeze out (the tendered shares DO NOT... but I think squeeze out does). I would imagine there would be a process through your broker to recover the tax withholding and/or claim on taxes... but I can imagine that may be some of the uncertainty. Did you call CITI directly? Contact? I bought Actelion in Switzerland directly and tendered, so I don't know if it was possible to tender ALIOY? But all shares that are now still trading (ATLN in Swiss and ALIOY in the US) are all untendered shares and will face withholding taxes since the payment will be treated like a dividend with a 35% withholding tax on the partt that isn't classified as a return of capital (see page 40 of the offer prospectus: http://files.shareholder.com/downloads/JNJ/4027672102x0x928304/3AE27B38-F170-4034-99BF-13690D373BB2/Offer_Prospectus_English.pdf). So it will depend on your broker, the tax treaty your country has with Switzerland and how your country deals with dividend taxes what you can get/will get. Link to comment Share on other sites More sharing options...
Grox Posted May 2, 2017 Share Posted May 2, 2017 You could have converted the ADRs (for a fee) through your broker into ATLN shares and tendered the ATLN shares. Obviously, would have had to occur before the deadline. I've spoken to a number of people at Citi / DB / my broker. All pretty clueless and unmotivated to find an answer. Some say 'you'll get the $70/share and cashed out Idorsia shares" but don't know about the withholding tax. Others say it hasn't been settled yet. Others say they don't even see that there was a transaction! Anyway, lesson learned for me: read the fine print with ADRs. Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax. After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries). Link to comment Share on other sites More sharing options...
Hielko Posted May 2, 2017 Share Posted May 2, 2017 You could have converted the ADRs (for a fee) through your broker into ATLN shares and tendered the ATLN shares. Obviously, would have had to occur before the deadline. I've spoken to a number of people at Citi / DB / my broker. All pretty clueless and unmotivated to find an answer. Some say 'you'll get the $70/share and cashed out Idorsia shares" but don't know about the withholding tax. Others say it hasn't been settled yet. Others say they don't even see that there was a transaction! Anyway, lesson learned for me: read the fine print with ADRs. Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax. After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries). But it's an unsponsored ADR, and given that JNJ acquired 92% of the shares I don't see how a withholding tax can be avoided at this point. I guess they could do a second tender offer, but so far they have communicated that they will do a squeeze out after acquiring 90%+ Link to comment Share on other sites More sharing options...
writser Posted May 2, 2017 Author Share Posted May 2, 2017 Well, the language in the offer document is ambiguous (emphasis mine): The consideration paid to remaining Actelion minority shareholders (irrespective of their tax residence) in the squeeze-out merger may, depending on the structuring of the squeeze-out merger, be subject to Swiss withholding tax of 35% on the difference between (i) the amount of the consideration and (ii) the sum of the nominal value of the Actelion Shares concerned and of the proportionate part of Actelion's reserves from capital contributions (Reservenaus Kapitaleinlagen) attributable to the respective Actelion Shares. I'd guess there will be some talks with the Swiss tax authorities given that we're talking about a 9-digit tax liability. Not sure what the exact laws are so I wouldn't say there is a 100% chance of a witholding tax. That said, I would not be comfortable owning the ADR at this point without a clear understanding of potential tax issues. I think the way the big banks are handling this merger is terrible. I know the ADR's are unsponsored but still, depositories are not voting their shares, not giving holders the option to vote, so now there is a huge potential tax liability, there is no news about how the spin-off will be treated, no news about tax issues, etc. If you are a retail investor holding these ADR's you are royally screwed. I'm glad I switched into the Swiss line a few weeks ago. Link to comment Share on other sites More sharing options...
rijk Posted May 2, 2017 Share Posted May 2, 2017 what is also remarkable disgusting in this case is that citi is the (unsponsored) adr depository bank + financial advisor in the tender offer, how can they not know? they designed this transaction..... they are probably buying the shares of scared adr and untendered shareholders....... Link to comment Share on other sites More sharing options...
Grox Posted May 2, 2017 Share Posted May 2, 2017 Writser - yes, I noticed the same language you bolded which is why I figured there is perhaps a way for the banks to get the ADRs off the hook with respect to taxes. And it is a joke that none of Citi + Actelion + JNJ release any news re: the treatment of ADRs concurrent with the tender results... In any case, it was a very small position for me so not worth the headache of wasting more time than I already have tracking down an answer. Frankly at this point, even if i found someone who sounded competent at Citi to explain what will happen, I wouldn't trust that they actually know what they're talking about! Link to comment Share on other sites More sharing options...
Hielko Posted May 2, 2017 Share Posted May 2, 2017 Well, the language in the offer document is ambiguous (emphasis mine): The consideration paid to remaining Actelion minority shareholders (irrespective of their tax residence) in the squeeze-out merger may, depending on the structuring of the squeeze-out merger, be subject to Swiss withholding tax of 35% on the difference between (i) the amount of the consideration and (ii) the sum of the nominal value of the Actelion Shares concerned and of the proportionate part of Actelion's reserves from capital contributions (Reservenaus Kapitaleinlagen) attributable to the respective Actelion Shares. I'd guess there will be some talks with the Swiss tax authorities given that we're talking about a 9-digit tax liability. Not sure what the exact laws are so I wouldn't say there is a 100% chance of a witholding tax. That said, I would not be comfortable owning the ADR at this point without a clear understanding of potential tax issues. Knowing how the average tax authority thinks they will be very happy to see a 9-digit tax asset (for them!). JNJ doesn't care what happens with their money, they just want to get 100% of the shares and Citi doesn't care because they just want to get the ADR fee. They will all just refer to the offering document, say that you can reclaim it and that's it. But perhaps they will surprise me and I'll be wrong. Link to comment Share on other sites More sharing options...
writser Posted May 2, 2017 Author Share Posted May 2, 2017 So cynical! If I was the founder of Actelion I would certainly hire a few people to look into this (*). He wants to list his new company - I'd say it is not very smart (and not very nice) to squander ~$500m of shareholder wealth because he doesn't give a shit about shareholders. Same for Citi, if they pull this trick a few times people will start to notice - and the potential bad press should easily outweigh the costs of hiring a tax consultant or two. (*) Actually I would be on my yacht telling my butler to do so. Link to comment Share on other sites More sharing options...
Guest roark33 Posted May 2, 2017 Share Posted May 2, 2017 The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares. I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay. Link to comment Share on other sites More sharing options...
Hielko Posted May 2, 2017 Share Posted May 2, 2017 So cynical! If I was the founder of Actelion I would certainly hire a few people to look into this (*). He wants to list his new company - I'd say it is not very smart (and not very nice) to squander ~$500m of shareholder wealth because he doesn't give a shit about shareholders. Same for Citi, if they pull this trick a few times people will start to notice - and the potential bad press should easily outweigh the costs of hiring a tax consultant or two. (*) Actually I would be on my yacht telling my butler to do so. Because I have seen it happen before, wouldn't be the first time ADR holders get screwed. The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares. I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay. Yeah, would be a sort of no-brainer if they could just do it. But usually there are laws/rules/regulations that make this hard for the company (no idea how it works in Switzerland). Link to comment Share on other sites More sharing options...
Jurgis Posted May 2, 2017 Share Posted May 2, 2017 The real solution to this is for JNJ to go out in the open market and buy up all the non-tendered shares. I don't see why they don't do it, given they are effectively getting a 4% discount on the 280 price they need to pay. Yeah, would be a sort of no-brainer if they could just do it. But usually there are laws/rules/regulations that make this hard for the company (no idea how it works in Switzerland). Wouldn't the last 0.0X% of shares go parabolic if someone tried to buy all remaining shares in open market? I agree with Hielko about laws, but even without laws you can't really buy out the last couple percentage without hugely spiking the price. Link to comment Share on other sites More sharing options...
writser Posted May 2, 2017 Author Share Posted May 2, 2017 Does that matter? Why would JNJ buy shares at any price? If allowed they could just put a bid in the market around 278 and everybody would be happy. Link to comment Share on other sites More sharing options...
Jurgis Posted May 2, 2017 Share Posted May 2, 2017 Does that matter? Why would JNJ buy shares at any price? If allowed they could just put a bid in the market around 278 and everybody would be happy. If everyone is forced to accept 278, they would. If they were not forced to accept, by law of supply and demand the price would go higher than that since you have a forced buyer that has to get to 100%. Yeah, sure if JNJ can always switch to some other method to squeeze out the last 0.0X%, then the holdouts risk getting worse price, but roark33 suggested buying all remaining shares in the market. And this just does not work. You have to wield the stick too to get the holdouts to tender. Link to comment Share on other sites More sharing options...
benhacker Posted May 2, 2017 Share Posted May 2, 2017 Jurgis, Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax. After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries). I think the point being, why isn't JNJ buying when teh price on offer now is demonstrably less than they are contractually committed to pay. His use of "all" was only a slight mispeak. The value to JNJ of doing what Roark proposes is proportional to # of shares they can get.... they don't need to get all of them... Link to comment Share on other sites More sharing options...
Jurgis Posted May 2, 2017 Share Posted May 2, 2017 Jurgis, Note: Without knowing the technicalities, I'll still be a little surprised if the ADRs have to pay a withholding tax. After all, if you're the sponsor of an ADR, you'd have to know this is an issue whenever ADR pays dividends or gets acquired (in most countries). I think the point being, why isn't JNJ buying when teh price on offer now is demonstrably less than they are contractually committed to pay. His use of "all" was only a slight mispeak. The value to JNJ of doing what Roark proposes is proportional to # of shares they can get.... they don't need to get all of them... Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts. 8) Link to comment Share on other sites More sharing options...
benhacker Posted May 2, 2017 Share Posted May 2, 2017 Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts. There is no law against buying in a squeeze out in Europe to my knowledge. Certainly, JNJ could not care about the $$$ amount here... Link to comment Share on other sites More sharing options...
Hielko Posted May 2, 2017 Share Posted May 2, 2017 Yeah, that part is probably based on laws and/or them not caring much about getting slight discount on small percentage of holdouts. There is no law against buying in a squeeze out in Europe to my knowledge. Certainly, JNJ could not care about the $$$ amount here... If there is no law, rule or regulations complicating this, the million dollar question is why wouldn't JNJ be buying every single day the past months? Link to comment Share on other sites More sharing options...
benhacker Posted May 2, 2017 Share Posted May 2, 2017 If there is no law, rule or regulations complicating this, the million dollar question is why wouldn't JNJ be buying every single day the past months? My comment was post tender only... after you are in the squeeze out period. Prior to that, I believe there are laws preventing it. Link to comment Share on other sites More sharing options...
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