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Ann: Expanded Heart Protection Discovery for Zantrene, page-246

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wombat777

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14/12/21

06:12

Post #: 58269713
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Originally posted by wombat777 ↑

I found this article. Thanks for pointing out return of capital as a potential approach. The article is a bit old though (2005).

https://www.tved.net.au/index.cfm?S...ation,_Returning_Capital_to_Shareholders.html

Capital Reductions

A capital reduction is usually undertaken to return an amount of capital to shareholders without the disposal of the underlying shares and that is not a dividend. It is possible however, that a capital reduction can be done in conjunction with a share cancellation. In this case it appears that this would not be treated as a share buy-back under Division 16K therefore there would be no opportunity to have part of the consideration paid treated as the payment of a franked dividend, which may be a disadvantage. Refer to class rulings for example including CR2002/45, CR2004/74 and CR2005/66.

A capital reduction out of the share capital of a company, without a share cancellation, will result in CGT Event G1 (section 104-135 of the 1997 Act) applying to the shareholder. If the amount of the payment is not more than the cost base of the shares then the cost base and reduced cost base are reduced by that amount. If the amount of the payment is greater than the cost base then the excess will be a capital gain and the cost base is reduced to nil. A shareholder cannot make a capital loss under CGT Event G1. If the share was acquired 12 months or more before the payment then the shareholder may be entitled to apply the 50% CGT discount where the other conditions of that concession are met.

If the capital reduction is made in return for the cancellation of the shares then CGT Event C2 (section 104-25 of the 1997 Act) will apply. A capital gain or loss will arise depending on whether the capital proceeds on the cancellation are more than the cost base or less than the reduced cost base. The capital proceeds market value substitution rules may apply however, with the modifications in respect of Event C2. The 50% CGT discount may again be relevant.

The tax consequences from a capital reduction are subject however to the various anti-avoidance and integrity measures discussed below [note - see link above for this detail].

Expand

This AMGEN deal with Tenebio in July is interesting - a bit of a hybrid between a buyout and a partnership.

This could be a potential transaction model for RACE where a single indication was sold rather than partnered.

The upfront cash could be partially distributed to shareholders via a capital return

Contingent milestones could provide additional upside and distributed to shareholders later

Rinse-repeat for other formulations

https://www.amgen.com/newsroom/pres...ash-with-future-contingent-milestone-payments

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Ann: Expanded Heart Protection Discovery for Zantrene, page-246

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