Vocus Communications Limited (VOC) – Retail Entitlement Offer

Created July 2017

Summary

  • Allocation – One ‘new’ VOC share for every 8.90 shares held in VOC on the record date
  • Offer price - $7.55 per new VOC share
  • Allotment Date – 28 July 2016
  • Bookbuild date – 21 July 2016
  • Retail premium payment date – 29 July 2016
  • Retail premium – $0.95 per entitlement
  • Cash received in CMA - $0.95 per entitlement

What is the VOC entitlement offer?
On 29 June 2016, VOC announced an accelerated fully underwritten renounceable rights issue. As part of the offer, eligible shareholders were offered the opportunity to purchase ‘new’ VOC shares at an offer price of $7.55, representing a 10.4% discount to the theoretical ex-right price of $8.42 on 28 June 2016.

What is the offer price?
The entitlements will be issued at nil cost with an offer price of $7.55 for each new VOC share.

Who is eligible for this entitlement offer?
To be eligible, VOC shareholders must satisfy the following criteria:

  • Registered shareholder of VOC Ordinary Shares on the Record Date (7.00pm (AEST), 4 July 2016);
  • 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 VOC shareholders can elect to either:

1)     Exercise the Entitlement

2)     Dispose of the Entitlement (sale via ASX or sale/transfer to a third party)

3)     Renounce the entitlement or allow the entitlement to lapse

Ineligible shareholders will have their entitlements automatically sold on their behalf in the Retail 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 VOC 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 VOC shareholder’s assessable income.

Where the VOC shareholder exercises all or part of their entitlement, they will receive new VOC shares. The cost base for each new VOC share will be $7.55, being the issue price of each new share.

The new VOC shares will be treated as having been acquired on the date the VOC 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 VOC 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 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 VOC Retail Entitlement offer satisfies the above requirements. Consequently, the retail premium of $0.95 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?

29 July 2016.

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 VOC shares, dividends received from new VOC 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 VOC shares and is not expected to do so.

How has the entitlement offer been reported by us?
Exercise of Entitlements
Any new VOC 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 $7.55.

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 $0.95 per entitlement.

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