How to enter Starwood/Marriott Merger involving Cash & Stock

Unknown

I am trying to enter the corporate merger transaction but can not account for both cash and stock. Below you will find the information on the transaction:

Stocks Involved: HOT & MAR

Closing Date: 09/23/2016

At closing Starwood stockholders will receive 0.8 shares of Marriott common stock plus $21.00 in cash for each share of Starwood common stock.

q_lurker

I don't have my spreadsheet handy but I'll try to outline the principles.



Marriott's form 8937 cited a fair market value for the MAR shares you received at $69.75/share, such that the 0.8 shares would represent $55.80. Combined with the $21 cash, your total value received would be $76.80 per Starwood share. You may be able to use a different value, and your broker may have used a different value than the $69.75. Proceed accordingly.



You then proceed assessing each lot of HOT separately. If you acquired the HOT shares for more than $76.80, you have a loss on this transaction, but do not get to claim this loss at this time. As such, you would sell your HOT lot for your cost basis (something higher than $76.80), and then buy the requisite number of MAR shares at the $69.75/MAR share leaving in your account the $21/HOT share in cash.



If you bought that lot of HOT on the cheap for less than $55.80/share, you have capital gain on this transaction of $21/HOT share. Thus you would sell this lot of HOT for your cost plus $21/share. If your cost for these shares was $30/share, you would sell these shares for $51/share. You would then buy the requisite number of MAR shares for your prior cost basis of this lot. If it was a lot of 12 shares and a basis of $360 = 30/share, you would be buying 9.6 shares of MAR for $360 = 37.50/MAR share.



Third possibility, you bought the HOT lot for between $55.80 and $76.80, then you seek that lot for $76.80 and your capital gain on the transaction is somewhere between $21 and $0 per HOT share. You would then buy the requisite MAR shares for $69.75/MAR share leaving $21/HOT share in the account.



If after all those lot by lot transactions, you ended with a fractional share of MAR shares, you would sell that fractional share for cash-in-lieu amount recieved.



Final touch that I would do, for each lot now held of MAR! I would Remove Shares and Add Shares to get the acquisition dates reverted back to the original acquisition dates for that original HOT lot.



I am working from memory here, so review some of the similar discourses on this type of transaction. Cost basis.com is a reliable source for comparison. Check my math! Do your own further due diligence. If you have further questions, I likely can't cross check any thing for a week or so.



HTH