Imperial Oil Limited (IMO.TO) – Odd Lot Tender Offer – Risk Free Upside
Current Price: C$61.88
Offer Price: C$62-C$78
Upside: C$12-C$1600 (for odd-lot positions)
Expiration Date: 10th of June
Imperial Oil, one of the largest Canadian Oil companies, launched a tender offer with an odd-lot provision for C$2.5bn or 5-6% of its shares. The tender range is C$62-C$78/share. Paid-up capital is just C$1.75/share, so this situation is actionable only for shareholders that are not liable for paying Canadian withholding taxes. Imperial Oil currently trades below the low range creating an opportunity for odd-lot shareholders to earn risk-free upside.
The stock is listed in both U.S. and Canada.
Worth noting that the upper limit price range is unlikely as 1) the tender size is quite small and the largest shareholder Exxon Mobil (owns 70%) will tender pro-rata; 2) even before the tender announcement Imperial Oil was trading at C$67/share and share price declined to C$63/share right after the offer announcement – the market clearly believes the tender will be priced at the low end of the range.
The tender includes a market sell-off-related risk. The condition is that neither S&P/TSX composite index, S&P, or Dow should decline more than 10% since the 2nd of May. All of them are down around 4-5% right now. This condition is very rarely used to cancel tender offers.
Is there any way for a non-Canadian to structure his/her investment in such a way that would avoid withholding taxes?
See discussions on this here http://ssi.wpdeveloper.lt/2022/04/brp-inc-doo-to-odd-lot-tender-offer-c1700-upside-only-for-canadian-residents/
Share price has climbed up to the middle of the tender range. As the upper range pricing seems unlikely, the idea is closed with +14% or C$860 (for odd lots) gain in 3 weeks.
I’m Canadian, and nearly the entirety of the proceeds of this tender were treated as a deemed dividend in Canada. That means it was almost all subject to dividend taxes, rather than just capital gains on the actual gain.
I was under the impression that this was a safe trade for Canadians. But reading the tender document again, it seems it was not. Am I misunderstanding something? If not, I think this risk should be pointed out in the future (I.e. even Canadians need to do this in a tax-sheltered account).