scottish power shares

jimf_2

hi there

I have received notification that Scottish power are issuing b shares in return for a third if currently held ordinary shares, they are then offering to buy the b shares back at £3.60 per share.They will also multiply remaing ordinary shares by 1.19 and the result will indicate show how many ordinary shares you will have.


All very confusing I know, can some one explain should I sell all my shares now or wait till the b share issue? I have 606 shares.

Thanks :undecided

ReportInvestor

If your investment in Scottish Power shares was for the long term I don't see a compelling reason to sell in the near future.

Why not just wait for your b shares and sell them at the fixed £3.60 price - I would expect most investors to be better off by going for this "initial repurchase offer" as your profit from selling your B shares (free of charge) will be treated as a capital gain for tax purposes, but within your 2006/7 Capital Gains Tax free allowance of around £8.5K.

Scottish Power is still considered a potential target in the Euro wide utilities merger game.

ReportInvestor

Having said that, I just bought the FT which reported UBS reckons all the utility mergers have been mooted and are in the price.

Which accounted for Friday's 1.7% drop in Scottish Power shares to 576p.

Not a bad 15 month performance for a "boring" utility - 2 year share price graph

caveat_emptor

jimf wrote:

hi there

All very confusing I know, can some one explain should I sell all my shares now or wait till the b share issue? I have 606 shares.

Thanks :undecided

SP are returning half the value, about £2.5B, of the sale of Pacific Corp. to the shareholders and this is the most tax efficient way of doing it. As RI advises, if you're going to sell your B shares take the cash as capital offset against your capital gains not dividend which will be taxed.
Treat the remaining shares on merit as you would any other share.

sxi-kenny

i work for scottish power and have also received this offer for my shares, dont have a clue what to do though, dont really understand it !

going to speak to someone on monday in work regarding it

moneyandmountains

ReportInvestor wrote:

I would expect most investors to be better off by going for this "initial repurchase offer" as your profit from selling your B shares (free of charge) will be treated as a capital gain for tax purposes, but within your 2006/7 Capital Gains Tax free allowance of around £8.5K.

I was a little confused by this as well, as Scottish Power seemed to say that the tax credit on the dividend option would make it effectively the same as the initial repurchase option for basic tax payers.

The quote from Part 8, paragraph 2 of the circular referring to the dividend option is for shareholders:
'liable to income tax at no more than the basic rate (including taking into account the receipt of the Single B Share Dividen), the tax credit attributable to the Single B Share Dividend should satisfy in full that individual Shareholder's liability to income tax on the Single B Share Dividend.

To jimf> You have to respond with your preference for the B shares payment, otherwise you will receive this as a dividend payment.

As ReportInvestor mentioned, if the sale of Pacific Corp has now been included in the share price, you should hang on until the B share issue. In the same way as some shares are sold ex-dividend, then if you sold your current ScotPower shares now, you might be risking a loss, unless you were sure that the B shares rights would be sold as well.

Note: this is not advice to hang on to your shares, just to check the facts before you make your decision.

ReportInvestor

Ah I see. So the repurchase option looks like it has been designed for higher rate taxpayers.

But it will make no difference for basic rate taxpayers which they choose.

ivagoldfish

Have read the above comments - and am still 'confused'.
I've only got 100 shares with SP so no major financial risk!
Would I be as well going for option 'A' on the SP form?

ceejam

If you're a basic rate tax payer, take the special dividen (of £3.60 per B share)

Basically, the compnay is how worth less, and to maintain the share price where it is, they are "buying back" 20% of the issued share capital by way of the B share scheme, and share consolidation!

The three options available to shareholders are to help people choose the best option to limit their tax liability!

Employees with shares ties into the ESOP scheme have the option to not sell the B shares until they are free of any liabiultiy for TAX & NICs, and recieve an annual intyerest payment on the value, until they sell them.

jem16

So as a higher rate tax payer I should go for the Initial Repurchase Offer or the Future Repurchase Offer?

From what I can see the only difference between these two offers is that I would receive dividends on the B shares if I hold onto them until 2011 when SP say that they would expect to have repurchased all B shares.

Is it better to hold onto them until then or should I sell them in May when I receive them?

jennifernil

I have 524 SP shares but am not a taxpayer. I may wish to sell some other shares later this year but would not expect this to take me over the CGT limit, does it make any difference whether I take the cash as a dividend or as a repurchase?