Woolworths Group plc demerger

 

On 28 August 2001, Kingfisher demerged its general merchandise business and new Woolworths Group plc shares were then separately listed on the London Stock Exchange. Kingfisher shareholders received one Woolworths Group ordinary share of 12.5 pence each for every Kingfisher share held. On the same date, the Kingfisher ordinary shares of 12.5 pence each were consolidated into ordinary shares of 13.75 pence each. Shareholders received 10 consolidated Kingfisher shares of 13.75 pence each for every 11 Kingfisher ordinary shares of 12.5 pence each.

The aggregate base cost for the purposes of taxation of chargeable gains of the Kingfisher ordinary shares and the Woolworths Group shares immediately after the demerger and share consolidation should be the same as the base cost of the Kingfisher ordinary shares immediately before the demerger. The base cost should be apportioned between the Kingfisher ordinary shares and the Woolworth Group shares by reference to their respective market values on the first day on which market values or prices are quoted or published for such shares. The precise basis on which the apportionment should be done will depend on a number of factors, including the type of share pool or holding the Kingfisher shares comprised for the purposes of the capital gains tax legislation.

The market value is found by taking the lower of:

  1. the lower of the two prices shown as the quotations for the shares on the London Stock Exchange Daily Official List plus one quarter of the difference between those two figures,

    and
  2. the halfway point between the day high and the day low.

From the London Stock Exchange Daily Official List for 28 August 2001:

Kingfisher plc

Closing spread Low High
374.75 - 377.25 373.00 - 385.00
(a) = 375.375 (b) = 379.00
(a) is lower than (b) therefore market value is 375.375p

Woolworths Group plc

Closing spread Low High
31.75 - 35.75 24.00 - 37.73
(a) = 32.75 (b) = 30.865
(b) is lower than (a) therefore market value is = 30.865p

Simplified example:

Before the demerger on 28 August 2001, a shareholder had 1,100 Kingfisher shares purchased in 1997, having an aggregate base cost of £5,000.00.

Following the demerger and the share consolidation, the shareholder has 1,000 Kingfisher shares and 1,100 Woolworths Group shares.

The base cost of the 1,000 consolidated Kingfisher shares would be:

(375.375 x 1000)
((30.865 x 1100) + (375.375 x 1000))
x £5000.00 = £4,585.28

(i.e. 91.7055% of the aggregate base cost)

Note: Proceeds from the sale of any fractional entitlement arising from the share consolidation should also be deducted in order to determine the base cost.

The base cost of the 1,100 new Woolworths Group shares would be:

(30.865 x 1100)
((30.865 X 1100) + (375.375 x 1000))
x £5000.00 = £414.72

(i.e. 8.2945% of the aggregate base cost)

IMPORTANT: The above information is intended as a general guide only and is based on current legislation. The information is relevant to individuals who are resident or ordinarily resident in the U.K. for tax purposes, who are the beneficial owners of their shares and who hold their shares as investments. It should be read in conjunction with the more detailed information contained in paragraph 7 of Part 4 of the circular to shareholders dated 1 August 2002. Kingfisher accepts no responsibility for the use that may be made of this information. Anyone who is in any doubt as to their taxation position should consult an appropriate professional adviser.