2010 Sharesave Scheme

Robbie_Duck

Hi, not sure where is the best place to ask this but here goes…

In April I started an employer shareshave scheme putting in £160 a month for three years with the option at the end of the term to buy company shares at an agreed price.

Since then our company has been subject to a successful takeover bid and the successful company has agreed to buy all existing shares at a price 3x the shareshave option price.

The takeover company have agreed to honour existing share options. However what is my existing share option? Is it the money I have put in already or the full 3 year term?

Company has said it will issue advice in the coming weeks but though t I would see if any one has any thoughts.

Thanks in advance

dlorde

I'm in exactly the same situation with my company sharesave scheme - half-way through the period, the company has been sold. They've agreed that we can exercise the options as if they had matured, and sell them at the share price named in the takeover.

So we have the option to take the cash we could make by using the savings we have - at the point of the takeover - to buy company shares at the option (discounted) price, and the sell them at the final (at takeover) price. As I understand it, the buying and selling won't actually occur - by exercising the options we will just get the cash we would have realised if we had done that (a kind of virtual exercise of the options).

Afterwards, we can still continue contributing to the savings scheme so we can collect the bonus when it matures (something like a with-profits scheme, I guess).

The net result is that we can either take profit on the shares by exercising the options, or let the options lapse and not take profit. Either way, our savings remain intact and we can carry on saving for the maturity bonus.

It seems obvious that, given that the takeover share price is way more than the discounted option share price, it would be foolish not to exercise the options.

chris_m

Robbie_Duck wrote: »

The takeover company have agreed to honour existing share options. However what is my existing share option? Is it the money I have put in already or the full 3 year term?

Your option is to buy the number of shares that your total contributions over the three years will buy at the option price - the price you were advised at the time you commenced the scheme. That would be the terms of the contract.
However, it may be amended by the arrival of the new company because, presumably, shares in the old company will be replaced by ones in the new company.

fredy_1972

A similar thing happened at my place of work about 4 years ago.
The buying consortium turned the public company into a private company and withdrew the shares from the stock exchange.
　
　
Basically you will continue your contributions until maturity date.
At maturity date you will have the option of either :
1, withdrawing your money (probably with a very small % bonus)
2, exercise your option and purchase the shares (note....you will receive something called Loan Notes, as the shares no longer exist)
　
　
Once your Shares/Loan Notes have matured, you will be given a couple of years to cash them in.
You will be able to cash them all in at once, or spread it over a couple of tax years. It is done this way to help employees avoid capital gains tax.
　
　
Looking at your figures:
You will pay £160pm over 3 years = £5760 in contributions
If you exercise your option in April 2013 you will receive £17280 worth of Loan Notes (maybe slightly more if you get a small bonus on your original contribution)
This will make a handsome profit of at least £11520
The Capital Gains Tax threshold is currently £10100, so be careful cashing all at once as you will pay tax on anything above this amount.

hope this helps

Robbie_Duck

Thanks all for your thoughts. I am obviously hoping we can carry on the payments for the full term and make a tidy sum. However, rumours circulating round the company at the minute are that the new company will allow us to pay in for a further 6 months only after takeover, thus reducing the term by two years and reducing potential profit by 2 thirds!

I will have to wait for official confirmation before i really know where i stand. I will keep you all updated.

Thanks again!

Doonhamer

What was the outcome, I'm heading into a very similar situation

Robbie_Duck

Take over completes next week.

We are allowed to pay in a further 6 months worth of contributions cutting a three year scheme down to 1 year.

Very frustrating and annoying cause while i still stand to make a nice £4K profit, because the scheme is cut short I have 'lost' an additional £8k profit if they had honoured the full term.

It seems wrong to me, I lumped into this one knowing that i stood to make a nice profit eventually because the option price was low.

cashbackproblems

Youv still done ok, im part of the company share scheme where you pay £125 p/m and the company matches it by 15% in the form of shares. Alot straight forward than ur share options!

Robbie_Duck

cashbackproblems wrote: »

Youv still done ok, im part of the company share scheme where you pay £125 p/m and the company matches it by 15% in the form of shares. Alot straight forward than ur share options!

Yeah i know, and i hope i dont come across as greedy! I suppose i should look as it as my pint glass in 1/3 full rather than 2/3 empty :rotfl: