Woodside Petroleum Limited (WPL) – Retail Entitlement Offer

Summary

  • Allocation – One ‘new’ WPL share for every 9 shares held in WPL on the record date
  • Offer price – $$27.00 per new WPL share
  • Allotment date – 16 March 2018
  • Bookbuild date – 12 March 2018
  • Retail premium payment date – 21 March 2018
  • Retail premium – $1.60 per entitlement
  • cash received in CMA – $1.60 per entitlement

What is the WPL entitlement offer?

On 14 February 2018, WPL announced a retail entitlement offer. As part of the offer, eligible shareholders were offered the opportunity to purchase ‘new’ WPL shares at an offer price of $27.00, representing a 10.3% discount to the theoretical ex-right price of $30.11 on 13 February 2018.

What is the offer price?

The entitlements will be issued at nil cost with an offer price of $27.00 for each new WPL share.

Who is eligible for this entitlement offer?

To be eligible, WPL shareholders must satisfy the following criteria:

  • Registered shareholder of WPL Ordinary Shares on the Record Date (7.00pm (AEDT), 19 February 2018);
  • have a registered address in Australia or New Zealand;
  • must not be an institutional shareholder;
  • are eligible to receive an offer under the Retail Entitlement Offer under all relevant securities laws; and
  • are not a US person

Where any of the above criteria are not satisfied, the shareholder is ineligible.

What are the options available to investors?

Upon issuance of entitlements, eligible WPL shareholders can elect to either:

  1. Take up the Entitlement
  2. Dispose of the Entitlement (sale via ASX or sale/transfer to a third party), or
  3. Renounce the entitlement and be sold through the Retail Shortfall Bookbuild

Ineligible shareholders will have their entitlements automatically sold on their behalf in the Retail Shortfall Bookbuild and any sale proceeds will be paid out to the ineligible shareholder.

What are the tax consequences of the issuance of the entitlements?

The issuance of entitlements should not, of itself, result in any amount being included in the WPL shareholder’s assessable income.

What are the tax considerations if the entitlements are exercised?

The exercise of entitlements should not, of itself, result in any amount being included in the WPL shareholder’s assessable income.

Where the WPL shareholder exercises all or part of their entitlement, they will receive new WPL shares. The cost base for each new WPL share will be $27.00, being the issue price of each new share.

The new WPL shares will be treated as having been acquired on the date the WPL shareholder exercised their entitlements.

What are the tax considerations if the investor disposes the entitlements?

Entitlements may be sold on the ASX, or sold or transferred to a third party. Any gain or loss arising from disposal will be assessed under the CGT provisions.

For CGT purposes, the entitlements that are sold will be treated as having been acquired on the same date as the original WPL shares.

A capital gain will arise if the capital proceeds from the disposal of the entitlement exceed the cost base. As the cost base of each entitlement is likely to be nil, the capital gain will be equal to the sale price.

Any capital gain may be reduced by the CGT discount provided certain conditions have been satisfied. For resident individuals and trusts, the discount is 50% and for superannuation funds, the discount is 33.3%.

What are the tax considerations if the investor renounces their entitlement or lets it lapse?

Renounced or lapsed entitlements will be sold via the Retail Bookbuild, with any proceeds (the retail premium) arising from the sale paid to the investor.

Based on the Taxation Ruling TR 2017/4, the retail premium represents capital proceeds from a CGT event. The investor will make a capital gain if the capital proceeds exceed the cost base of the entitlement provided the investor can do one or more of the following:

  1. Exercise all or part of their entitlement
  2. Sell all or part of their entitlements either on-market or off-market
  3. Do nothing

The WPL Retail Entitlement offer satisfies the above requirements. Consequently, the retail premium of $1.60 represents capital proceeds.

Any capital gain may be reduced by the CGT discount provided certain conditions have been satisfied. For resident individuals and trusts, the discount is 50% and for superannuation funds, the discount is 33.3%.

When was the retail premium paid to investors who renounced their entitlement or allowed it to lapse?

21 March 2018

What are the tax consequences for non-resident investors?

Where a non-resident investor disposes, transfers or lapse their entitlement, any capital gain that arises from the transaction may be disregarded, as their entitlement is unlikely to constitute taxable Australian Real Property (TARP).

Where a non-resident investor exercises their entitlement and acquires new WPL shares, dividends received from new WPL shares may be subject to a non-resident withholding tax of up to 30%.

Has the ATO issued any class rulings relating to the tax treatment of proceeds from the Retail Bookbuild?

The ATO has not released a relevant class ruling for the entitlement offer for new WPL shares and is not expected to do so.

How has the entitlement offer been reported by us?

Exercise of Entitlements

Any new WPL shares acquired through exercise were taken to be acquired on the date the investor exercised their entitlement.

The cost base of each new share was $27.00.

Disposal of Entitlements

We have reported a disposal of the relevant entitlement on the date of sale on the ASX or transfer to a third person. The capital proceeds were the amount received from the sale or transfer.

The full capital proceeds was reported as a capital gain derived from the sale or transfer in the ‘Disposal of capital items’ section of the investor’s Detailed Report.

Renouncement or Lapse of Entitlement

Based on the ATO Taxation Ruling TR 2017/4, any retail premium received was reported as capital gain of $1.60 per entitlement.

This was reported in the ‘Disposal of capital items’ section of the investor’s Detailed Report.