How many shares of IP stock and how much cash was I entitled to receive in the exchange?
You were entitled to receive .7073 shares of IP common stock plus $50.00 of cash in respect of each share of Champion common stock.
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What average price per share was used to determine the number of shares I received?
The average price per share of IP common stock used to determine the number of shares received in exchange for each share of Champion common stock was computed pursuant to the terms of the merger agreement on the basis of the average volume weighted price for IP stock on 15 randomly selected trading days during the 30 trading day period from May 3, 2000 through June 14, 2000. The average volume weighted price used in that exchange ratio calculation was $35.3441. Therefore, .7073 shares of IP common stock represented the $25 of value agreed upon by Champion and IP when the transaction was negotiated.
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How can I find out the specific 15 days that were selected to determine the $35.3441 average volume weighted price?
Pursuant to the conditions set forth in the Merger Agreement, the following 15 trading days were randomly selected:
- May 5 ($37.6863)
- May 9 ($37.6589)
- May 11 ($36.4331)
- May 16 ($40.1154)
- May 24 ($35.9391)
- May 25 ($35.2468)
- May 26 ($33.5176)
- May 30 ($34.3426)
- May 31 ($35.2109)
- June 5 ($35.1060)
- June 6 ($34.5637)
- June 8 ($33.4442)
- June 12 ($33.5303)
- June 13 ($33.2784)
- June 14 ($34.0886)
The volume weighted average price of IP common stock is rounded to the nearest .0001 for each date.
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How do I determine my cost basis in the IP shares I received? What is my cost basis if I surrendered my shares after the close of the exchange period?
Your cost basis in the IP shares received will be equal to their fair market value on the date on which you sold your Champion stock. If you tendered your Champion stock during the exchange period, you must determine the fair market value of the IP shares on the expiration date of the exchange offer, June 16, 2000. On that date, the mean between the highest and lowest quoted selling prices was $32.6250 per share.
If you did not tender your shares during the exchange offer period, you must determine the fair market value of your IP shares on the effective date of the merger, June 20, 2000. The mean between the highest and lowest quoted selling prices on that date was $31.5313 per share.
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Do I allocate my basis in the Champion shares between the cash and new shares of IP that I received?
No. You should not allocate your basis in the Champion shares between the cash and the new shares of IP that you received. Your basis for the IP shares will be equal to their fair market value on the date you sold your Champion shares in the exchange offer or the merger, as the case may be. If you tendered your Champion stock during the exchange period, you must determine the fair market value of the IP shares on the expiration date of the exchange offer, June 16, 2000. If you did not tender your shares in the exchange offer you must determine the fair market value of the IP shares on the effective date of the merger, June 20, 2000. The mean between the highest and lowest quoted selling prices on June 16 was $32.6250 and on June 20 was $31.5313.
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Is the IP/Champion transaction fully taxable?
Yes. The exchange of Champion shares for IP shares plus cash is taxable. Therefore, you should determine whether the transactions on either June 16, 2000 or June 20, 2000 resulted in a gain or loss, which should be reported on your estimated tax returns and your annual tax returns.
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I am required to pay quarterly taxes; how do I determine my capital gains/losses related to the shares of Champion that I held for tax purposes?
In order to calculate net gain or loss, you must first determine your basis in the Champion shares. Such basis is then subtracted from the total of the fair market value of the IP shares plus the cash you received in order to determine your net gain or loss.
Your basis is generally equal to the price you paid for your Champion stock. For example, if you purchased a share of Champion common stock for $20, then your basis would be $20. If you received your Champion common stock as a gift or by inheritance your basis will be calculated differently, and you should consult your tax advisor.
The fair market value of the IP shares used in calculating gain or loss will be different if you submitted your Champion shares during the exchange offer or at some subsequent date. If you submitted your Champion shares during the exchange offer, you must value your IP shares on the expiration date of the offer, June 16, 2000. If you did not tender your shares during the exchange offer, you must determine the fair market value of the IP shares on the effective date of the merger, June 20, 2000. The mean between the highest and lowest quoted selling prices on June 16 was $32.6250 and on June 20 was $31.5313.
If you held your Champion common stock as a capital asset, you would then determine your capital gain or loss by subtracting your cost basis from the total amount of consideration that you received. For this purpose, the total consideration is comprised of the fair market value of the IP shares as described above plus all cash which you received, including any cash paid in lieu of fractional shares.
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I held 100 shares of Champion common stock with an average cost basis of $20/share and I tendered my shares prior to the expiration of the exchange offer. How many IP shares should I receive? How much cash should I receive? What is my basis in the new shares? What are my tax consequences?
The average volume weighted price used in the exchange ratio calculation was $35.3441. This means that .7073 shares of IP common stock represented the $25 of value agreed upon by Champion and IP when the transaction was negotiated. The 100 shares of Champion stock would therefore convert into 70 shares of IP stock. Fractional shares (the remaining .73 shares) are paid in cash. Therefore, if you held 100 shares of Champion common stock, you would receive 70 shares of IP common stock.
Because the agreed upon cash value of transaction was $50 per common share of Champion stock, cash received would equal $5,000 (100 Champion common shares x $50/share) plus the cash value of any fractional IP shares due. Pursuant to the Merger Agreement, the value of fractional shares is determined by taking the average of the last reported sales price of IP common stock for the 20 trading days ending on June 14, 2000. Therefore, the fair market value of the fractional shares is $35.1969. In this case, because there are .73 fractional shares remaining, the shareholder would receive $25.69 (.73 shares x $35.1969) in cash for these shares. Total cash received for the 100 Champion common shares would therefore equal $5,025.69.
The calculation that follows outlines the shareholder’s basis in the new shares, as well as the applicable tax consequences of this transaction. In this case, the shareholder would recognize a gain on the transaction:
A. Original Cost Basis
100 shares x $20/share = $2000.00
B. Consideration Received in Exchange
1. 70 IP shares x $32.625 (Value on June 16) = $2283.75
2. 100 Champion shares x $50/share = $5000.00
3. Cash for .73 fractional shares (.73 x $35.1969) = $25.69
TOTAL = $7309.44
C. Gain or Loss
Total Consideration $7309.44
Cost Basis ($2000.00)
Gain recognized $5309.44
D. Basis in the New IP Shares $2283.75
Note: This calculation is provided for informational purposes only. Specific questions about your unique situation should be discussed with your tax advisor.
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I forgot to tender my shares, what should I do now? What will I receive for my Champion shares? How long do I have to surrender my shares?
If you have not tendered your shares, you should deliver them promptly to the Disbursing Agent, Chase Mellon Shareholder Services, L.L.C. You are still entitled to receive .7073 shares of IP common stock and $50 cash for each share of previously held Champion common stock plus the cash amount payable in lieu of fractional shares.
You should have received a Letter of Transmittal following the merger, which provi des instructions for effecting the surrender of Champion common stock certificates in exchange for such consideration.
Questions and requests for assistance concerning this process should be directed to the Information Agent at its telephone number set forth below:
Innisfree M&A Incorporated (212) 750-5833 (call collect) or Call Toll Free: (877) 750-5837
Specific questions about your unique situation should be discussed with your tax advisor.
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How do I obtain an annual report or other financial documents?
Current and past years’ annual reports to shareholders may be accessed by going to Annual Reports. For past years’ annual reports that are not listed or for annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements and more, visit FreeEdgar, an online resource for SEC filings, or www.sec.gov, the website of the U.S. Securities and Exchange Commission.
Note: FreeEdgar is neither affiliated with nor maintained by International Paper.
If you prefer to receive printed copies of these reports, you may order financial information online using the Financial Requests order form, or you may call the Investor Relations Reports hotline at (800) 332-8146 (toll free within the U.S.) or (901) 419-4352 (outside the U.S.)
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