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Today's quote:

Tuesday, April 12, 2022

The Woodside and BHP Petroleum Merger

For a full presentation, click here


Woodside's shareholders will vote on this proposed merger on 19 May 2022. If agreed on, Woodside will issue on 1 June 914,768,948 new Woodside shares to BHP's shareholders at the rate of one Woodside share for every 5.5340 BHP shares held on 26 May.

For tax purposes, the value of those new shares will be treated as an 'in specie' dividend payment with an attached 30% franking credit, resulting in a sizeable tax advantage to BHP shareholders whose marginal tax rate is below 30%, including those who are receiving those shares into a superfund taxed at 15%, and, even better, those who are receiving them into a superfund in which they are already in a tax-free pension phase.

As for the actual share price movements on that day, Woodside's share price should not move much, if at all, as a result of this new issue, as they receive BHP's petroleum business in exchange for those newly issued shares, while BHP's share price may dip in line with the amount of this 'in specie' dividend, as it always does after any dividend pay-out.

Even though by my reckoning BHP has traded away its petroleum business too cheaply - you only have to look at the previous BHP-Billiton merger to see that it has a history of holding the wrong end of the stick in a merger - I am looking forward to a favourable vote on 19 May and becoming a shareholder in Woodside. Happy days are here again!

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