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Stockholder Advisory for Exchanged Holders of Genzyme Biosurgery Common Stock On December 18, 2000, Genzyme Corporation completed the formation of Genzyme Biosurgery by combining two divisions, Genzyme Surgical Products and Genzyme Tissue Repair, and completing the acquisition of Biomatrix, Inc. The following information is provided to assist stockholders in determining what their adjusted tax basis should be following the exchange of their respective shares into Genzyme Biosurgery common stock. This information is a general summary. Your own federal income tax consequences will depend on your individual tax situation and may differ from those described here. For example, special rules may apply to you if you acquired your Genzyme Surgical Products, Genzyme Tissue Repair or Biomatrix shares at different times for different prices or upon exercise of an employee stock option. This summary does not address state or local tax consequences. Holders of Genzyme Surgical Products Common stock Determining your Tax Basis. For each share of Genzyme Surgical Products common stock that you owned, you received 0.606 of a share of Genzyme Biosurgery common stock. To determine the tax basis for your Genzyme Biosurgery shares, you will need to know your tax basis in your Surgical Products common stock. This figure may be obtained from bank or brokerage statements, inheritance or gift records, or your own personal records. Your aggregate tax basis for your Genzyme Biosurgery shares will equal your tax basis for your Surgical Products common stock, less the portion of that tax basis that is allocated to any fractional share for which you received cash. Treatment of Fractional Shares. You received cash in lieu of any fractional share of Genzyme Biosurgery common stock into which your Genzyme Surgical Products common stock converted, at a rate of $11.79 per share of Genzyme Biosurgery common stock. This cash will be treated for federal income tax purposes as paid in redemption of the fractional share. Provided the fractional share is treated as a capital asset, you realized gain or loss on this deemed redemption measured by the difference between the cash received for the fractional share and your tax basis for the fractional share. Example. Suppose you owned 600 shares of Surgical Products common stock which you purchased for $12.00 per share. Your tax basis in your Surgical Products shares would be $7,200.00. Consequently, your tax basis per share for the whole shares of Genzyme Biosurgery common stock that you received and your gain or loss on the cash you received in lieu of a fractional share of Genzyme Biosurgery common stock would be as follows: a. Tax basis of Surgical Products common stock = $7,200.00 Holders of Genzyme Tissue Repair Common stock Determining your Tax Basis. For each share of Genzyme Tissue Repair common stock that you owned, you received 0.3352 of a share of Genzyme Biosurgery common stock. To determine the tax basis for your Genzyme Biosurgery shares, you will need to know your tax basis in your Tissue Repair common stock. This figure may be obtained from bank or brokerage statements, inheritance or gift records, or your own personal records. Your aggregate tax basis for your Genzyme Biosurgery shares will equal your tax basis for your Tissue Repair common stock, less the portion of that tax basis that is allocated to any fractional share for which you received cash. Treatment of Fractional Shares. You received cash in lieu of any fractional share of Genzyme Biosurgery common stock into which your Genzyme Surgical Products common stock converted, at a rate of $11.79 per share of Genzyme Biosurgery common stock. This cash will be treated for federal income tax purposes as paid in redemption of the fractional share. Provided the fractional share is treated as a capital asset, you realized gain or loss on this deemed redemption measured by the difference between the cash received for the fractional share and your tax basis for the fractional share. Example. Suppose you owned 700 shares of Tissue Repair common stock which you purchased for $6.00 per share. Your tax basis in your Tissue Repair shares would be $4,200.00. Consequently, your tax basis per share for the whole shares of Genzyme Biosurgery common stock that you received and your gain or loss on the cash you received in lieu of a fractional share of Genzyme Biosurgery common stock would be as follows: a. Tax basis of Tissue Repair common stock = $4,200.00 Former Biomatrix, Inc. Stockholders In General. As a Biomatrix stockholder, you received a combination of cash and Genzyme Biosurgery common stock in the merger in exchange for your Biomatrix common stock. The amount of cash and Genzyme Biosurgery common stock you received depended on the election you made as to the form of merger consideration you wished to receive. If you made a valid cash election with respect to your shares, you received a prorated merger consideration consisting of a combination of $11.03 in cash and 0.7019 of a share of Genzyme Biosurgery common stock for each share of Biomatrix common stock for which the cash election was made. If you made a standard election, you received $10.50 in cash and 0.7162 of a share of Genzyme Biosurgery common stock for each share of Biomatrix common stock for which the standard election was made. Determining your Tax basis. To determine the tax basis for your Genzyme Biosurgery shares, you will need to know your tax basis in your Biomatrix common stock. This figure may be obtained from bank or brokerage statements, inheritance or gift records, or your own personal records. Your aggregate tax basis for your Genzyme Biosurgery shares (including fractional shares) will equal your aggregate tax basis in your Biomatrix common stock, minus the cash portion of the merger consideration (excluding any cash you received in lieu of a fractional share), plus the amount of gain, if any, that you recognized on the exchange. You recognized gain on the exchange if the value on the merger date of the total merger consideration (cash and Genzyme Biosurgery common stock ) into which your Biomatrix common stock converted is greater than your tax basis in your Biomatrix common stock. The amount of gain you recognized equals the lesser of (i) the cash portion of the merger consideration or (ii) the result obtained by subtracting your tax basis in your Biomatrix common stock from the value of the total merger consideration. Since Genzyme Biosurgery common stock was not traded on the NASDAQ on the date of the merger, the value of your Genzyme Biosurgery common stock must be determined using some method other than its average trading price. Genzyme has determined, based on the advice of its financial advisors and tax counsel, that the value of a share of Genzyme Biosurgery common stock on the merger date was $11.79. Treatment of Fractional Shares. You received cash in lieu of any fractional share of Genzyme Biosurgery common stock into which your Biomatrix common stock converted, at a rate of $11.79 per share of Genzyme Biosurgery common stock. This cash will be treated for federal income tax purposes as paid in redemption of the fractional share. Provided the fractional share is treated as a capital asset, you realized gain or loss on this deemed redemption measured by the difference between the cash received for the fractional share and your tax basis for the fractional share. Examples. The examples below illustrate the way in which you would calculate your tax basis in your Genzyme Biosurgery common stock in the following three situations: (1) if you recognized a gain on the exchange in an amount less than the cash merger consideration you received, (2) if you recognized a gain on the exchange in an amount equal to the cash merger consideration you received, and (3) if you did not recognize a gain on the exchange. Example 1- Gain recognized on the Exchange in an Amount Less Than the Cash Merger Consideration. Suppose that you owned 1,200 shares of Biomatrix common stock which you purchased for $18.00 per share, and you made a cash election with respect to those shares. I. Your tax basis in your Biomatrix shares would be $21,600.00, and those shares would be converted in the merger into the following merger consideration: a. Cash merger consideration = 1,200 x $11.03 = $13,236.00 II. Since the total value of the merger consideration you would receive would be greater than your tax basis in your Biomatrix shares, you would recognize gain on the exchange, calculated as follows: a. Total value of merger consideration = $23,166.48 III. Consequently, your tax basis per share for the whole shares of Genzyme Biosurgery common stock that you received and your gain or loss on the cash you received in lieu of a fractional share of Genzyme Biosurgery common stock would be as follows: a. Tax basis of Biomatrix shares = $21,600.00 Example 2- Gain recognized on the Exchange in an Amount Equal to the Cash Merger Consideration. Suppose that you owned 800 shares of Biomatrix common stock which you purchased for $8.25 per share, and you made an election to receive the standard consideration for those shares. I. Your tax basis in your Biomatrix shares would be $6,600, and those shares would be converted in the merger into the following merger consideration: a. Cash merger consideration = 800 x $10.50 = $8,400.00 II. Since the total value of the merger consideration you would receive would be greater than your tax basis in your Biomatrix shares, you would recognize gain on the exchange, calculated as follows: a. Total value of merger consideration = $15,155.20 III. Consequently, your tax basis per share for the whole shares of Genzyme Biosurgery common stock that you received and your gain or loss on the cash you received in lieu of a fractional share of Genzyme Biosurgery common stock would be as follows: a. Tax basis of Biomatrix shares = $6,600.00 Example 3- No Gain recognized on the Exchange. Suppose that you owned 1,200 shares of Biomatrix common stock which you purchased for $20.00 per share, and that you made a cash election with respect to those shares. I. Your tax basis in your Biomatrix shares would be $24,000.00, and those shares would be converted in the merger into the following merger consideration: a. Cash merger consideration = 1,200 x $11.03 = $13,236.00 II. Since the total value of the merger consideration you would receive would be less than your tax basis in your Biomatrix shares, you would not recognize gain on the exchange. III. Consequently, your tax basis per share for the whole shares of Genzyme Biosurgery common stock that you received and your gain or loss on the cash you received in lieu of a fractional share of Genzyme Biosurgery common stock would be as follows: a. Tax basis of Biomatrix shares = $24,000.00 Because the tax consequences of the merger may vary depending upon your particular circumstances, we urge you to consult your own tax advisors about the federal, state, local or foreign tax consequences this transaction will have on you. |
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