Bristol Myers Squibb/Celgene acquisition

J. Roger Moody

I own Celgene shares. Yesterday Bristol Myers Squibb acquired Celgene for one share of BMY plus $50.00. How do I record this in Quicken?

Jim_Harman

I have edited the title of your post to describe your question

Tom Young

According to the S-4 issued in connection with the acquisition the transaction is a fully taxable transaction.

The "short version" of how this works is that you total up the value of all that you received for your Celgene shares - Stock, cash and CVRs - and use those as the "proceeds" of your sale.  The proceeds of the sale vs. the basis in your Celgene shares is a LT/ST gain or loss as the math dictates.

I wouldn't try to make any entries at this point as Bristol Myers Squibb will as some point release information about the fair market values of the cash and CVRs, though you're free to come up with your own estimates of the "fair market value" on the non-cash consideration and make an entry if you wish.

Mechanically what you'll do here is enter a sale against the "proceeds" and then use the resulting cash to buy the stock and CVRs at the same fair market value you used for your proceeds estimate.

Here's the S-4 guidance:

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The receipt of the merger consideration by U.S. holders pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder will recognize taxable capital gain or loss in an amount equal to the difference, if any, between (i) the sum of (A) the amount of cash, including cash received in lieu of fractional shares, received in the merger, (B) the fair market value of the shares of Bristol-Myers Squibb common stock received in the merger and (C) the fair market value of the CVRs received in the merger, each determined on the date of the consummation of the merger and (ii) such U.S. holder’s adjusted tax basis in its shares of Celgene common stock exchanged therefor.

If a U.S. holder’s holding period in the shares of Celgene common stock surrendered in the merger is greater than one year as of the date of the merger, the capital gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized in connection with the merger is subject to limitations under the Code. If a U.S. holder acquired different blocks of shares of Celgene common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of shares of Celgene common stock that it holds.

A U.S. holder’s initial aggregate tax basis in Bristol-Myers Squibb common stock received in the merger will equal the fair market value of the Bristol-Myers Squibb common stock as of the date of the merger. The holding period of the Bristol-Myers Squibb common stock received in the merger will begin on the day after the merger.

A U.S. holder’s initial aggregate tax basis in the CVRs received in the merger will equal the fair market value of the CVRs as of the date of the merger. The holding period of the CVRs received in the merger will begin on the day after the merger.

This discussion assumes that the receipt of the merger consideration, including CVRs, is treated as a “closed transaction” for U.S. federal income tax purposes, meaning that a holder of Celgene common stock will measure its gain or loss upon its exchange of Celgene common stock in the merger based on the fair market value of the merger consideration on the effective date of the merger. However, the U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a contrary position. Assuming this treatment is correct, a payment with respect to a CVR would likely be treated as a non-taxable return of a U.S. holder’s adjusted tax basis in the CVR to the extent thereof. A payment in excess of such amount may be treated as (i) a payment with respect to a sale of a capital asset or (ii) income taxed at ordinary rates. Additionally, the parties have agreed to treat a portion of such payment as imputed interest under Section 483 of the Code (as discussed immediately below).

In accordance with the CVR agreement, Bristol-Myers Squibb has agreed to report imputed interest on the CVRs pursuant to Section 483 of the Code, except as otherwise required by applicable law. Accordingly, a portion of a payment with respect to a CVR will be reported as imputed interest, which will be ordinary income to the U.S. holder of the CVR. The interest amount will equal the excess of the amount received with respect to the CVR over its present value as of the consummation of the merger, calculated using the short-term applicable federal rate as the discount rate and using such U.S. holder’s regular method of accounting (such amount being taken into account when paid, in the case of a cash method holder, and, when fixed and determinable, in the case of an accrual method holder).

If a CVR expires without any payment with respect thereto, although it is not free from doubt, the U.S. holder generally will recognize a loss, which loss likely would be a capital loss, in an amount equal to the U.S. holder’s adjusted tax basis in the CVR. The use of capital losses is subject to limitations. Each U.S. holder should consult its tax advisors regarding the treatment in its particular circumstances of the expiration of a CVR without any payment.

Upon a sale or exchange of a CVR, a U.S. holder should recognize capital gain or loss equal to the difference between (i) the sum of the amount of any cash and the fair market value of any property received upon such sale or exchange (less any imputed interest, as described below) and (ii) the U.S. holder’s adjusted tax basis in the CVR. Such gain or loss generally will be long-term capital gain or loss if the U.S. holder has held the CVR for more than one year. A portion of the amount received by a U.S. holder upon the sale or exchange of a CVR may be treated as imputed interest income, determined as described above.

Due to the legal and factual uncertainty regarding the valuation and tax treatment of the CVRs, you are urged to consult your tax advisors concerning the tax consequences to you resulting from the receipt of CVRs in the merger.

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peteclem

Also the creation of the BMY.rt part of the merger.

Tom Young

@peteclem

That's the "CVR" which stands for "Contingent Value Right."  You receive one CVR (BMY.rt) for each share of Celgene tendered. 

shoopes

:s So, is this a wait and see transaction??? Reading all of this stuff gave me a headache...

q_lurker

shoopes said:

So, is this a wait and see transaction??? Reading all of this stuff gave me a headache...

Wait and see would be my choice at this early stage.  

You are free to determine your own value of all you received -- 1-share of BMY (about $57), 1-share of the BMY.RT (about $2-3), and the $50 cash (probably $50) for a total of about $110 -- and sell your Celgene shares (in Quicken) for that amount/share.  Then you would buy the compatible number shares for BMY and BMY.RT.  Should not be too hard to redo those transactions at a later date when more final information comes in.  

jbc1229

I have a different issue but this seems the appropriate forum in which to raise it. I did receive Bristol Myers shares and rights in exchange for Celgene shares. For some reason, even though there is definitely a public market and a reported price for the rights (in the area of $2-$3 per share), when I do my updates on Quicken to reflect current market values of the securities in my accounts, Quicken assigns to the rights the same value that the shares of Bristol Myers have. The value of each Bristol Myers share is about 20 times the value of each right, so this error Quicken results in the value of my portfolio being significantly overstated. I don't understand why Quicken can't reflect the value of the rights when I ask it to update the value of my portfolio.

q_lurker

@jbc1229:  What ticker is associated to the rights in your Quicken file?

My testing suggests the ticker for download of quotes via Quicken's sources should be BMY"  -- that is a double-quote symbol after the BMY letters.  

If you have your brokerage-provided downloads matching to a Quicken security for those rights, the ticker symbol within your Quicken file can differ from the brokerage supplied ticker.  

HTH

Chuck McCloskey IV

I recorded it as 1) corporate acquisition stock for stock 1 CELG = 1 BMY with BMY closing at 56,
2) another stock for stock 1 CELG = 1 BMYRT closing at 2.13, and
3) $50 return of capital per share on BMY with all three steps on 11/20/19.
The basis information appeared about correct.

q_lurker

@Chuck McCloskey IV:  I don't see how that worked.  If you had CELG that BMY acquired (Step 1), there should not have been any CELG for the BMYRT to acquire in step 2.  

Secondly, the potential issues to manage are both basis of the new holdings and cap gains liability since this is a taxable event (per the information Tom Young quoted from the S-4 submission).  I don't see where cap gains are being developed in your process.  Such cap gains calculations would apply without regard to whether this might be a taxable or a tax-deferred (IRA-type) account.  

I have not seen anything further from BMY on this event.  It remains to be seen if something else (Form 8937?) will be published.

emhamiltn

The correct Ticker Symbols as verified through Fidelity are:

Bristol Myers Squibb (CUSIP ID: 110122108): BMY
Bristol Myers Squibb CVR (CUSIP ID: 110122157): BMY/R

Fidelity assigned a value of $2.25 per CVR which was the closing price on 11/21/19 - see attached Fidelity download screenshot.

(Side note - Yahoo Finance lists the CVR ticker as: BMY-RI)

emhamiltn

*Correction* Fidelity uses the ticker BMY/R if you want to look up a quote, but in the porfolio it uses BMYRT as the ticker symbol. Confusing!!!

dwhubbs

Now that BMY has published the assigned values, has anybody figured out the proper entries for recording this transaction?

Celgene 1:1 stock issue
$50.00 per share resulting in Cap Gain from Celegene
new shares in BMYRT equal to shares in BMY

Jim Randle74

I'm still trying to record the acquisition of the contingent tights shares in QW. Etrade says the symbol is BMYRT, but it won't let me add that as a stock or as other. Has anyone else found a way?

q_lurker

When adding a new security within Quicken, both the name and the ticker must be unique.  It may be necessary to edit your existing Bristol Myers named security to something like, Bristol Myers Common.  Then you should be able to add the new security with ticker BMYRT.  That may come in as simply Bristol Myers in which case you would want to rename it with a CVT or Rights addendum. 

After you have the two securities named and tickered correctly in Quicken, make sure you have the right online (eTrade) security matched to the right Quicken security.  You can uncheck the box on the security details about matched to online security.  At the next opportunity with etrade, Quicken will prompt you to match them up.  

q_lurker

So BMY has published info about the transaction including this FAQ posting:  https://www.bms.com/investors/shareholder-services/shareholder-faq.html

That FAQ identifies the transaction as taxable.  To me, that means the Celgene sharesholder is immediately (2019) responsible for the gains (or losses) associated with this disposal of their Celgene shares.

Further, the FAQ identifies a relevant value of the exchanged BMY and CVT rights shares as 56.41 and 2.30, respectively.  That means (to me) that the Celgene shareholder received $56.41 + $2.30 + $50 = $108.71 total for each share of Celgene that they owned.

My Quicken transaction would then be to sell all shares of Celgene for $108.71 / share, then buy a like number of BMY shares and BMYRT (or BMY") shares for 56.41 and 2.30 per share, respectively.  

[Caveat:  I am not a tax pro, enrolled agent, CPA, or otherwise qualified to offer the above opinion.  Do your own due diligence.  Consult reputable advisers as may be applicable.]

dwhubbs

q_lurker,

Again thanks for your quick response. I understand and respect your caveats.

My summary of the information I have received is as follows.

1:1 stock swap between Celgene and BMY
50.00/shr cash generating a stcg or ltcg based on time and original purchase price of Celgene shares.
1:1 stock in BMYRT

To record this event I did the following:

Entered a CGLong transaction to record the actual capital gain
Entered a deposit transaction to record the remaining cash
Entered a corporate acquisition (stock for stock) to swap the Celgene for BMY shares. I used the basis provided by my broker for BMY.
Entered a add shares transaction to record the new BMYRT shares. I used the basis provided by my broker.
Used the click here option if the symbol did not appear in the list to create BMYRT symbol.

These steps appear so far to generate the values I need to record the merger event. I need to watch the add cash to make sure it only affected my cash balance.

Any comments or suggestions would be appreciated.

q_lurker

Fine -- as long as you realize the $50 cash received and the $2.30 value received as BMYRT shares and the $56.41 received as BMY shares are your proceeds that define your capital gains.    

Personally, I think you are making it more complicated than necessary.  Three transactions needed:  a)  Sell Celgene, b) Buy BMY, c) Buy BMYRT. 

Your BMY shares are a new position; not an acquisition of Celgene.  The new BMY and BMYRT shares take on the acquisition date of the real-world transaction (November 20, 2019).  They do not carry over the acquisition dates and basis of the Celgene shares.  At least, that is my understanding.

tramakrishnan

When I tried to add the ticker symbol for BMY CVR in Quicken, it does not give me the ticker symbol for the CVR in the drop down menu. So i have not been able to put in the transaction for buying the CVRs. How do i do the CVR transation? The symbols in the drop down menu are BMY, BMYMP, BMY.DY, BMY.DG and BMY". The ticker symbol in my brokerage account is BMY.RT.

Thanks.

q_lurker

@tramakrishnan:  Try the BMY" (my limited investigation result).  The ticker in Quicken does not have to match the ticker from your Financial Institution as long as you otherwise match the two securities up correctly.  The names for the two Bristol Myers securities do need to be unique, so you might have to first rename the common shares to something like Bristol Myers Common" and then rename the CVR shares to something like "Bristol Myers CVR"  It is frequently helpful to have similar named securities distinct enough that it is clear which is which.   

tramakrishnan

Thanks q_Lurker. BMY" worked for the CVR. I gave 2 diff names for BMY common shares and BMY CVR as you suggested. Thanks for the help.

Mark256

> @q_lurker said:

> Personally, I think you are making it more complicated than necessary.  Three transactions needed:  a)  Sell Celgene, b) Buy BMY, c) Buy BMYRT. 
>
> Your BMY shares are a new position; not an acquisition of Celgene.  The new BMY and BMYRT shares take on the acquisition date of the real-world transaction (November 20, 2019).  They do not carry over the acquisition dates and basis of the Celgene shares.  At least, that is my understanding.

That does seem like the easiest way. How do i find the sales price of Celgene and the purchase prices of BMY and BMYRT?

q_lurker

Mark256 said:

That does seem like the easiest way. How do i find the sales price of Celgene and the purchase prices of BMY and BMYRT?

See my post above from Jan 18. Or use values to match the basis your brokerage is showing. 

Mark256

I can’t get the CVR to update its price. I named it Bristol Myers CVR and manually used BMY.RT as ticker. The CVR just stays with $2.30 as the price. How did you all remedy this?

q_lurker

@Mark256 Ticker I use in Quicken for the rights is BMY"  that's a double quote at the end.