Ann: Combination of Premier's Apparel Brands with Myer, page-9

Here is the way it seems to turn out for we Premier shareholders.

1. MYR issues Premier with 890.5 million new MYR shares (in return for the Apparel Brands).
2. Premier currently has 260 million MYR shares. (note: disregard Solomon Lew's Premier and MYR shares in this analysis , as he is being treated just like any other shareholder).
3. At completion of the Transaction, both Premier's new and existing MYR shares will be distributed to Premier shareholders - thus 1150.5 million MYR shares to Premier shareholders.
4. Premier currently has 159,658,438 shares on issue.
5. The MYR shares will be issued on a pro-rata basis to Premier shareholders - 1150.5million MYR shares distributed to holders of 159.658 million shares, means we will get 7.2 MYR shares for each Premier share we hold.

At current market value of MYR (let me use $1 for simplicity) that is $7.20 per existing Premier share (or $1.1505 Billion total)

All simple so far, but what is the cost base of those shares.

Clearly we don't want them to be issued at $0 as that way we individually would face CGT on the full face value of the new MYR shares we personally own.

We would prefer them to be issued as a capital return of $1 each (ie cost base of $1, and no capital gains tax liability until MYR sp rises).

Better still (actually much better still for most!), we would prefer Premier to declare a fully-franked special dividend of $7.20 per PMV share, and then instead of issuing $7.20 cash, give us 7.2 MYR shares. That way we get the new MYR shares at a cost base of $1 each (and make our separate arrangements with the ATO re tax payable or tax returnable on the $7.20 taxable div and the $3.08 franking credit).

But Premier will not have enough franking credits for that.


Now consider PMV’s tax position comprises its historical tax base for the old 260 million MYR shares (whatever that is), the profit or loss (maybe both profit and loss) that it will make on sale of Apparel Brands and tax payable on that (and possible franking credits), and its existing franking credit balance, and any other tax losses.

There is a lot for the accountants (and lawyers) to work out there.

Fortunately, it is in the interests of Premier to minimise tax for itself and shareholders on the transaction and to sweeten it for shareholders (via franking credit flow). And we have a smart Board and our Chairman’s separate personal holding in PMV will be affected similarly to us (same technically but he is in a higher tax bracket than me!)

It will be interesting to see how the Board optimises the distribution outcome for Premier shareholders (with all the constraints and opportunities they have).