I bought 37 shares of BAX in December 2013 at a price of $67.71 per share. Consequently, I received 37 shares of BXLT as a result of the spin-off. With this addition, DivGro now contains 47 shares.
I've decided to hold onto these BXLT shares rather than sell them. I like the financial objectives of both companies. BAX intends to accelerate profit growth over the next 5 years through geographic expansion and new product introduction. BXLT will focus on growth, led by personalized treatments for patients with rare diseases in hematology, immunology and oncology.
The spin-off has been structured as a tax-free distribution for U.S. federal income tax purposes. Details of the spin-off are available on Baxter's website and includes information on cost-basis treatment for BAX shares.
I'm following the suggested approach to determining fair market value of BAX shares, which I'm paraphrasing here:
To determine the fair market value of BAX and BXLT shares, use the closing price on 1 July 2015 for BAX ($38.86 per share) and BXLT ($31.50 per share). Based on these prices and given the 1:1 distribution ratio, 55.23% of a BAX shareholder’s aggregate tax basis should be allocated to the shareholder's shares of BAX and 44.77% to the shareholder's shares of BXLT.
Shares of BAX owned
BAX aggregate tax basis @ $67.71 per share
Shares of BXLT received (1:1 distribution)
Tax Basis Allocation
I've updated my portfolio to reflect the allocated tax bases for BAX and BXLT. Because I like buying shares in chunks of $2,500 at a time, BAX and BXLT are no longer full positions. For now, I'll keep BAX and BXLT as partial positions.
In future, I could buy more shares of each company and turn these into full positions. Before doing so, I'd like to see how the spin-off impacts dividends. Hopefully, the combined dividend (should BXLT decide to pay a dividend) would match or exceed the pre-spinoff amount of 52¢ per share every quarter!
Do you own BAX? If so, are you holding onto your BAX and BXLT shares?