Withheld first, argued later

Utah Medical Products is buying back a fifth of itself at $75.00 a share. The shares closed on Friday at $74.13, and the offer document puts holders of fewer than 100 shares at the front of the queue. A holder outside the United States who tenders 99 shares and has every one of them bought is paid $5,643, not $7,425. The other $1,782 is withheld before anyone has decided whether it is owed. This issue is about the gap between what is withheld and what is taxed, and about a second sentence in the same document that closed the odd-lot door three days before the document was dated.

The lesson

How US withholding on a self-tender works for a holder outside the United States

When a US company buys back its own shares, US tax law does not assume the holder has sold anything. It asks a question first: after the buyback, does this holder own a smaller slice of the company than before? If the answer is yes, the payment is a sale and only the gain matters. If the answer is no, the whole payment, not the gain, is treated as a dividend.

A US holder finds out which it was when filing a return. A foreign holder does not get to wait. Dividends paid abroad are taxed by withholding at the source, and on payment day the paying agent cannot know which answer applies to which holder. So it withholds on everything, and leaves the holder to argue afterwards.

Run 99 shares through it, bought at Friday’s close and all taken up:

Three things in that table are worth slowing down for. The base is the gross payment, $75.00 a share, not the $0.87 of profit. The form a foreign holder files to prove foreign status does not stop it; the sentence says so in its first clause. And the amount held back is more than twenty times the spread the position was opened for.

Withheld is not the same as owed. The same document sets out the three tests that decide whether the payment was a sale after all: Section 13 says a holder is treated as selling “if the exchange (i) results in a ‘complete termination’ of all such Holder’s equity interest in the Company, (ii) results in a ‘substantially disproportionate’ redemption with respect to such Holder or (iii) is ‘not essentially equivalent to a dividend’ with respect to the Holder.” The first is met when every share the holder owns is tendered and bought. The second is met when the holder’s percentage of the company after the buyback “is less than 80% of the percentage” owned before. The third asks for a “meaningful reduction”, and for small holders the document quotes the tax authority’s own view: “any reduction in the percentage interest of a stockholder whose relative stock interest in a publicly held corporation is minimal (an interest of less than 1% should satisfy this requirement) and who exercises no control over corporate affairs should constitute such a ‘meaningful reduction.’”

Whether 99 shares pass depends on how many of them are actually bought, which is a proration question. The company has 3,173,818 shares and is buying 650,000, so 2,523,818 remain:

So on the document’s own description, a small holder who tenders everything lands on the sale side of the line in every case except the one where almost the entire company tenders. The document accordingly says a foreign holder “may be eligible to obtain a refund of all or a portion of any tax withheld” on meeting one of the tests. That is the whole lesson in one sentence: the tests decide whether the money comes back. They do not decide whether it leaves.

Route (B) in the quoted sentence is the only way to stop it leaving. It has to be established “to the satisfaction of the Company and the Depositary” before payment, and the document does not say how a broker holding shares in its own name for a foreign client goes about that. A refund, by contrast, is the holder’s own claim against the US tax authority, made after the fact. Until one of the two happens, $1,782 of a $7,339 position is out of the holder’s hands, to earn $86.

Readers of issue #2 will recognise the shape. In a Canadian issuer bid the deemed dividend is the price minus paid-up capital, withheld at 25% or 15% under a treaty, and it is final. Here the base is the whole price, the rate in this document is 24%, and it is provisional. The rate differs from one document to the next; the paragraph to look for is the same.

The second sentence: an odd-lot priority with a date on it

The offer was announced after the close of 14 September, when the document says the shares stood at $70.67. The ownership date is Monday 21 September. The document is dated Thursday 24 September, a day on which the shares closed at $74.75. By the date on the document, 94% of the $4.33 gap to the offer price had closed, and the clause covered only people who already held on the 21st. A buyer at Friday’s $74.13 is an ordinary tenderer, prorated with everyone else if more than 650,000 shares come in, and proration is exactly what the three tests above turn on. One softening clause: the company “reserves the right, but will not be obligated, to purchase all Shares duly tendered by any stockholder who tendered all Shares owned beneficially and who, as a result of proration, would then own beneficially an aggregate of fewer than 100 Shares.” A right the company may use is not a priority a holder can count on.

The offer expires at 17:00 New York on Wednesday 7 October. On payment the document says only that “in previous UTMD tender offers, the checks were mailed to selling shareholders about two weeks after the expiration date.” Source: Offer to Purchase, 29 September 2026. Author holds: no.

This week’s lesson has its own guide: US buybacks from abroad and the withholding that comes before the tax. Earlier lessons have their own guides: odd-lot priority (issue #1), the Canadian paid-up-capital test (issue #2), broker cutoffs and record dates (issue #3) and the upper limit in a split-off exchange offer (issue #4).

This week’s situations

Live offers with terms and a deadline, each worked through with the same arithmetic. This week’s filings produced 35 captures: 22 were tenders by funds with no listed share, 9 were amendments or results notices for offers already finished or already covered in these pages, 2 were for an unlisted class of a listed fund, 1 was the Utah Medical re-filing and 1 was a new Canadian auction that cannot be priced yet. No new block joins the list. These carry over, re-priced on Friday’s closes.

Four more offers are open, each short of a usable window at this size. Fnac Darty (Paris) trades at €34.54 against a €35.00 cash offer, +1.33%; the closing date is set only after European merger clearance, whose first-phase review should end by early November, with closing expected by the end of 2026. Eurobio Scientific (Paris) trades at €25.10 against a buy-out offer at €25.30, +0.80%; the offer was filed with the French regulator on 24 September and the indicative timetable in the filing release has it open from 9 to 20 November with the compulsory acquisition from 24 November, all subject to approval. Kip McGrath (Sydney) fell from A$0.73 to A$0.66 in the two sessions from 1 October, and that is not a deal breaking: the shares went ex a A$0.06 dividend, and the bidder’s terms say the A$0.73 cash offer “may be reduced from A$0.73 to A$0.67 per share” by a dividend. Against A$0.67 the spread is +1.5%; the offer closes Wed 14 Oct at 04:00 New York (19:00 Melbourne). Reef Casino Trust (Sydney) has an unconditional A$4.67 cash offer that opens on Thu 8 October and closes Mon 9 November at 03:00 New York (19:00 Sydney); at A$4.63 (1 Oct, the last session it traded) that is +0.86%, and a broker minimum of about A$6 is 1.3% of a 99-unit ticket, more than the whole gross. The author holds none of these.

Gross = (offer − price) ÷ price, on the part of the position the offer takes up. Annualised = gross ÷ days to expected cash × 365, for that trade only — not a yearly or portfolio return.

Broker execution

Two offers reach the cash stage, and what “tendered” really means

This is the running record of what a broker actually does, as opposed to what the offer document says. The measured gaps between broker cutoff and offer expiry stand at three: Arbutus, four hours early. Oma Savings Bank, about two days early. Delivery Hero, more than two days early. Medtronic is half-measured: the depositary’s book-entry channel is expected to shut seven hours before the midnight expiry, and the broker’s own cutoff sits somewhere before that — asked for and still not answered, three weeks into a four-week offer. For ACV Auctions and Nagarro the cutoff is also unpublished.

New this week is the other end of the pipe: how long cash takes after expiry. Arbutus expired on 29 September and pays “on or about October 5, 2026”, six days. Oma Savings Bank closed on 25 September and S-Bank pays “on or about 7 October 2026”, twelve days. Utah Medical’s document says about two weeks. Those days belong in the annualised figure, and they are days in which the shares sit on a tender line that cannot be sold.

One operational note from the Arbutus tender. For several days every internal record of the position said “tendered”, while the broker’s corporate-action screen said the shares had not been allocated to an election choice. The election was only real once the 99 shares showed on the broker’s odd-lot tender line instead of the ordinary one. A tender exists when the position shows on the tender line, not when the instruction was sent.

The dates that matter · New York time

Killed, and what to look for next time

A sweep for what the feed missed

Last week a tradable offer finished before it ever appeared here. GDEV, a Nasdaq-listed games company, ran a fixed-price self-tender at $11.03 from 31 August to 28 September; only 57,110 shares were tendered against 1,813,236 sought, so nobody was prorated. The filings feed behind this newsletter caught the amendments filed after expiry and never the document that opened the offer. So this week every opening tender-offer filing on the regulator’s daily index from 1 September to 2 October was read: 60 of them. Forty-eight were funds with no listed share. Twelve had a listed share somewhere in the picture; ten of those had already been screened here, including the two Franklin funds below, and two had never been printed. Neither of the two survives. So on this window GDEV was one miss, not a pattern. Author holds: no.

Sturm Ruger. Beretta Holding is offering $44.80 in cash for up to 2,400,184 shares, expiring one minute after 23:59 New York on Thursday 15 October, against a Friday close of $44.37, +0.97%. It is a partial offer and the document has no odd-lot clause at all: “If more than 2,400,184 Shares are tendered, all Shares tendered will be purchased on a pro rata basis.” Beretta already owns 9.93% of the 15,978,256 shares the document counts, so if every other holder tendered, about 17% of each tender would be taken and the rest returned at whatever the market then pays. A 0.97% spread on a sixth of the position is 0.16% on the whole of it. Next time: in a partial offer, multiply the spread by the share of the tender that can be taken before reading anything else. Author holds: no.

Cadeler. A share-for-share exchange that moves the company’s home from Denmark to England, one new share for each old one, expiring 21 October. There is no cash and no spread; a tender offer filing is not always an offer of anything. Author holds: no.

Two Franklin municipal funds, PMM and PMO, filed cash tenders on 1 October at 92.875% of liquidation preference. The tender is for their remarketed preferred shares, which the document says “are not listed on any securities exchange”; the shares that trade are the common, which nobody is offering to buy. Next time: match the class in the offer to the class on the screen before pricing anything. Author holds: no.

WildBrain is not killed, only unpriceable. The announcement of 29 September gives a modified Dutch auction at C$1.30–1.45 for up to C$20 million, expiring 17:00 New York on Tuesday 3 November, and says odd-lot tenders under 100 shares “will not be subject to proration”. The shares closed at C$1.27 on Friday, so the whole range is above the market. What the announcement does not give is paid-up capital per share, the number that decides how much of the price a non-resident loses to Canadian withholding, and the circular that carries it could not be retrieved this week. If paid-up capital were close to zero, 15% of a C$1.45 price would be C$0.22 a share, more than the entire range above Friday’s close. A Canadian issuer bid cannot be priced from its press release. Author holds: no.

And the one from issue #1 finished

Arbutus’s US$230 million auction cleared at US$5.00, the floor of its US$5.00–5.75 range. The company took up 46,000,000 shares, 9,307,231 of them through proportionate tenders in a separate pool; 65,709,919 had come in through auction and purchase-price tenders, and those holders had “approximately 55.6% of their tendered Shares taken up … (other than ‘odd lot’ tenders, which were not subject to proration)”. The release adds that Arbutus “does not expect that a deemed dividend will arise” under Canadian tax law, as the paid-up-capital arithmetic in issue #2 indicated. The shares closed at $4.45 on Friday.

Put numbers on what the odd-lot clause was worth. A holder who tendered 1,000 shares had about 556 bought at $5.00 and about 444 handed back, worth $4.45 each on Friday: $4,756 in all. Ninety-nine shares tendered as an odd lot are bought whole for $495.00, against $440.55 at Friday’s price. The author’s 99 cost $499.96, bought above the floor in the expectation of a higher clearing price that did not come, so the tender produces a loss of $4.96 once the cash arrives. The clause worked exactly as described. The entry price was the mistake. Author holds: yes, 99 shares, on the tender line until payment.

The book

Every position, and every closed one

Open, at Friday’s closes. Arbutus, 99 shares at an average cost of $5.0501, accepted in the auction at $5.00 and awaiting payment; the shares still sit on the broker’s tender line. Apollo Commercial, 300 at $6.9150, $6.20 on Friday, held for the first distribution. Oma Savings Bank, 300 at €17.07, all submitted into S-Bank’s €17.20 cash offer, which completed with 96.78% acceptance; payment is due on or about 7 October. Delivery Hero, 50 at €37.035, €36.52 on Friday, not yet accepted. Perfect Corp, 1,200 at an average cost of $1.8088, $1.91 on Friday, held into the October meeting. And 100 contingent value rights from the Atai transaction, on a placeholder line with no market.

New in the book: SDCL Efficiency Income Trust (London), 2,150 shares bought on 28 September at an average cost of 35.31p, 33.6p on Friday. It is a managed wind-down, approved by shareholders in July, with no offer price and no timetable for returning cash; the next date is a general meeting on 15 October to appoint two directors proposed by its two largest shareholders, which the board recommends. Author holds: yes, 2,150 shares.

Closed since the last issue: nothing. Arbutus and Oma Savings Bank close when their cash lands, and both move to the outcome record then, Arbutus at a loss.

Closed earlier, and on the record: Lindsell Train Investment Trust, +£22.67. Realised losses on the record: Air Canada, −C$24.95, and Zevia, −US$323.10.

The outcome record, every closed position with fills and realised P&L: https://99shares.org/scoreboard/

This publication discusses the mechanics, deadlines and public filings of corporate actions such as tender offers, exchange offers and liquidations. It is not a financial advisory service under the Financial Advisers Act 2001. The author is not a licensed financial adviser and is not an appointed representative of one. Nothing here is a recommendation to buy, sell or hold any security, and nothing is tailored to any reader’s circumstances. We do not answer individual investment questions. We accept no payment, sponsorship or other benefit from any issuer named. Any position in a named issuer is disclosed in the issue. Figures are taken from the primary source cited. Readers should not rely on this publication in making an investment decision.

Terms of use · 99shares.org · hello@99shares.org · Sent every Sunday. Unsubscribe at any time.