How do I record a "merger of equals"

Kimbyya

L3 just merged with Harris Corp. The merger is considered a "merger of equals". My broker removed L3 shares from my account and then added 1.3 times as many shares back to my account under the new ticker. How do I record this transaction?

q_lurker

(IMO) You should not trust any financial institution to get these transactions 'right' for you.  Just because Fidelity presents it as two transactions in their data does not make that 'right'.  

I would:

• delete the transactions downloaded from Fidelity;
• make sure the old LLL security now has an 'invalid' ticker symbol, like LLL(Old), so as not avoid confusion with the new L3Harris security; 
• make sure that the L3Harris security now existed in your Quicken data file (Ctrl-Y for the security list) with the proper ticker (LHX) and noted as 'Matched with Online security';
• Use the Enter transactions button to generate a Corporate Acquisition transaction whereby L3Harris acquires LLL at the 1.3 share ratio.  I would likely use the June 28 opening value of LHX at 190.43 as the 'value', but I do not believe that is a critical value; I do not believe the value is used beyond establishing the value on that date. Whether the transactions is dated 6/28 or 7/1/19 is also likely of no great consequence.   

The Corp. Acq. transaction should generate one Remove Shares transaction and, for each lot held, one Add Shares transaction with the applicable cost basis and acquisition date for that lot.   

HTH

Sherlock

There is no such thing as a Corporate Acquisition (stock for stock) transaction type.  The Corporate Acquisition (stock for stock) wizard may be used to produce the appropriate Removed and Added action transactions for the merger.  Note: You may still need to introduce a Sold action transaction for cash in lieu of partial shares.

volvogirl

Look for Corp. Acquisition transaction.   I found you have to manually calculate how many new shares you got for each ONE old share. Took me 3 times to notice that part.

Kimbyya

Thank you for your quick response. I should have added that when Quicken downloaded the merger transaction from my brokerage Fidelity, it downloaded it as two transactions, which is also also how Fidelity shows the transactions. Quicken automatically showed the two transactions' Actions as 'Boughtx' and 'Soldx' with zero cost.

The Corporate Acquisition (stock for stock) transaction does not really fit with the LLL transaction. LLL and Harris combined to become a new company called L3Harris. See the attached image for how the transactions look on Fidelity's website. I have no information on price per share. I only know that my number of shares of L3 reduced to zero and then 1.3 times as many shares for the new company were added to my account.

This is so confusing to me. I wish Quicken provided much more info on how to handle these things. At this point, I'm feeling like there is no transaction available to correctly reflect this type of merger.

Any help you can provide is
much appreciated.

q_lurker

(IMO) You should not trust any financial institution to get these transactions 'right' for you.  Just because Fidelity presents it as two transactions in their data does not make that 'right'.  

I would:

• delete the transactions downloaded from Fidelity;
• make sure the old LLL security now has an 'invalid' ticker symbol, like LLL(Old), so as not avoid confusion with the new L3Harris security; 
• make sure that the L3Harris security now existed in your Quicken data file (Ctrl-Y for the security list) with the proper ticker (LHX) and noted as 'Matched with Online security';
• Use the Enter transactions button to generate a Corporate Acquisition transaction whereby L3Harris acquires LLL at the 1.3 share ratio.  I would likely use the June 28 opening value of LHX at 190.43 as the 'value', but I do not believe that is a critical value; I do not believe the value is used beyond establishing the value on that date. Whether the transactions is dated 6/28 or 7/1/19 is also likely of no great consequence.   

The Corp. Acq. transaction should generate one Remove Shares transaction and, for each lot held, one Add Shares transaction with the applicable cost basis and acquisition date for that lot.   

HTH

Kimbyya

In reading about the merger, the merger is described as a "merger of equals". L3 and Harris combined to become a new company called L3Harris. If you were an L3 shareholder, which I was, you received a number of shares in the combined company equal to 1.3 times the number of L3 shares that you held. The news articles indicates that this was not an acquisition but a merger.

The attached image shows how the transaction in my account appears on Fidelity's website.
(Note that the "-- "to the right of the transaction description represent the amount of the transaction or in this case, 0.) When Quicken downloaded the merger transaction from my brokerage Fidelity, it downloaded it as two transactions, which is also also how Fidelity shows the transactions. Quicken automatically showed the two transactions' Actions as 'Boughtx' and 'Soldx' with zero cost. I know this is not correct.

Someone suggested I use the Quicken transaction type "Corporate Acquisition (stock for stock)" but it does not seem applicable (as again, the reporting shows this transaction as merger not an acquisition). This type of transaction wants you to enter acquiring company, company acquired, new shares issued and price per share for acquiring company.

When looking at my Fidelity positions, I still have the same tax lot history as before. On the surface, it just looks like a "name change" and adjustment to my share balance. I realize though that it is obviously more than a name change, but for purposes of Quicken, I'm thinking I should maybe treat it as a name change and simply change the ticker (if Q will let me do that) and adjust the share balance.

Any help is very much appreciated.

Kim

Sherlock

There is no such thing as a Corporate Acquisition (stock for stock) transaction type.  The Corporate Acquisition (stock for stock) wizard may be used to produce the appropriate Removed and Added action transactions for the merger.  Note: You may still need to introduce a Sold action transaction for cash in lieu of partial shares.