Agilent dutch auction $32 to 37 for 73 million shares out of 500 million

How do we calculate possible effect on value & ROI of the upcoming
Agilent dutch auction?

I'm trying to decide what to do with my 38 shares of Agilent (A),
whether to tender them for the upcoming dutch auction or not. We only
have a few days to decide.

Given an investor who bought 100 shares of HP at $55 (currently HWP) in
August of 1998; and given the subsequent June 2000 spinoff, 38 shares
of Agilent were produced from those 100 HWP shares with a cost basis of
22% x $55 = $12 per share for the A stock (I think).

Today, given Agilent has 500 million outstanding shares and given the
roughly 15% repurchase (73 million shares) at $32 to $37 per share; and
given the current price of roughly $35 per share, how do we calculate
the shift in value from the $2.7 billion repurchase and subsequent
stock valuation?

I'm confused about whether or not to tender my 38 shares of A to this
dutch auction due to my inability to ascertain what the expected value
& ROI would be of selling them vs keeping them.

I'm guessing any one share will be worth 115% more than it is today due
to the repurchase. At today's prices, that makes its value about 1.15 x
$35 = $40. And, I'm guessing my current ROI if I were to tender them at
$35 would be 27$ per year since 1998.

Does this mean that the expected calculated rise of A will be to $40
the day after the dutch auction completes?

I'm so confused - Please help me understand the mechanics better,
Karin

REFERENCES:
http://biz.yahoo.com/bw/051114/20051114006188.html?.v=1 (Dutch Auction)
http://www.thestreet.com/funds/taxforum/969115.html (Cost Basis)
http://www.hp.com/hpinfo/investor/re...q/infostmt.pdf (Cost
Basis)

wrote:
> I'm guessing any one share will be worth 115% more than it is today due
> to the repurchase. At today's prices, that makes its value about 1.15 x
> $35 = $40. And, I'm guessing my current ROI if I were to tender them at
> $35 would be 27$ per year since 1998.

That was supposed to say the ROI at the moment is 27% (not $27) per
year for the 7 years since I bought the 100 shares of HP at $55/share.

How does a pour soul such as I determine if this dutch auction is a
good deal or not?

Karin

wrote:
> That was supposed to say the ROI at the moment is 27% (not $27) per
> year for the 7 years since I bought the 100 shares of HP at $55/share.

I'm beginning to doubt my math (I'm so very confused).

HWP COST BASIS:
100 sh HP @ $5,400 x 78.04% at Agilent spinoff = $4,214.16 cost basis
That makes the cost basis for HWP $42.14 per share.

AGILENT COST BASIS:
$5,400 x 21.96% = $1,185.84 cost basis for 38.14 shares
That makes the cost basis for Agilent $31.09 per share.
But there's that matter of the taxable .14 share given to me as cash in
2000 already which I don't know how to correct for in the cost basis
above.

How do we calculate the ROI for 7 years since buying 100 shares of HP
at $54?
How do we figure if it's a good deal or not to tender at the upcoming
dutch auction?

So very confused,
Karin

In article < .com>,
"danbrown" <> wrote:
>1) The stock symbol for Hewlett Packard is HPQ, not HWP
>
>2) In Quicken, you need to have used a "Corporate Securities Spin-off"
>transaction to record the receipt of 38.14 shs of Agilent, followed by
>a SALE of the .14 fraction.
>
>3) The data that you'll need to enter into Quicken should be in the
>paperwork that you received from HP. Alternatively, it's available on
>HP.com in the Corporate/Investor Relations/Mergers & Acquisitions page.

The current Hewlett Packard / Compaq (HPQ) resulted from the spin off
from the old (pre 2000) Hewlett Packard (HWP) and Agilent (A) so I
believe the OP is correct in using HWP as the original sticker symbol
as per HP's own web page FAQ current today at
http://www.suite101.com/discussion.c...767/latest/719

I ran the math through Quicken assuming you purchased 100 shares of
HWP at $54 per share and you actually have a cost basis of around $75
dollars for the HWP shares (now HPQ) and the cost basis for the
Agilent shares (A) were 0 but may have changed over time due to the
divident reinvestment schedule as shown at the HP FAQ at
http://www.hp.com/hpinfo/investor/re...gilentfaq.html

Main point is if you were to sell today, you would need to claim a
capital loss of $75 -30 = $45 for the original HWP shares (now HPQ)
and a capital gain of $35 - 0 = $35 for each of the Agilent shares.
The 0.14 of a share can just be ignored as the IRS doesn't force you
or the 1099's to report sectional shares (just like they let you drop
the cents in the dollars columns).

All this is discussed in complete detail in
http://sec.edgar-online.com/2001/05/...5/Section6.asp

In article < .com>,
says...

> I'm beginning to doubt my math (I'm so very confused).
>
> HWP COST BASIS:
> 100 sh HP @ $5,400 x 78.04% at Agilent spinoff = $4,214.16 cost basis
> That makes the cost basis for HWP $42.14 per share.
>
> AGILENT COST BASIS:
> $5,400 x 21.96% = $1,185.84 cost basis for 38.14 shares
> That makes the cost basis for Agilent $31.09 per share.
> But there's that matter of the taxable .14 share given to me as cash in
> 2000 already which I don't know how to correct for in the cost basis
> above.

Quoting from:
Spinoff Math: Divvying Up Your Cost Basis in H-P and Agilent
By Tracy Byrnes
Senior Writer, The Street.com
http://www.thestreet.com/funds/taxforum/964624.html

"In this example, the basis in that 0.14 share that arrived in cash is
$4.35 ($31.10 x 0.14 share). So you will owe tax on the difference
between the cash you receive and $4.35.

Since you pay tax on that fractional share, its basis is no longer part
of your overall Agilent basis. You're left with 38 shares, each with a
cost basis of $31.10, so your remaining Agilent basis is $1,181.80."


> How do we calculate the ROI for 7 years since buying 100 shares of HP
> at $54?

HPQ basis after the spinoff is $4,214.00
A basis after the spinoff is $1,180.80
-----------
Total: $5,394.80

Value today (29-Nov-05):
HPQ: $2,996.00 ($29.96 x 100)
A: $1,354.70 ($35.65 x 38)
----------
Tot: $4,350.70

HPQ 7y ROI = -28.9%
A 7y ROI = +14.7%
~~~~~~~~~~~~~~~~~~~~~~
If you tender the A at $35, you would lose money vs. today's price;
the 7y ROI would be +12.7%.
If you tender at $37, the 7y ROI would be +19%

(this assumes you didn't reinvest you HPQ dividends).

> How do we figure if it's a good deal or not to tender at the upcoming
> dutch auction?


Very simple. Do you think the stock will go down? If yes, then it's a
good deal. Since Agilent is capping the auction at $37, they've pretty
effectively set your maximum return for you.

--Gene

wrote in news:1133180873.335665.229820
@g43g2000cwa.googlegroups.com:
> 100 sh HP @ $5,400 x 78.04% at Agilent spinoff = $4,214.16 cost basis
> That makes the cost basis for HWP $42.14 per share.
> $5,400 x 21.96% = $1,185.84 cost basis for 38.14 shares

You severly miscalcuated your cost basis, you twit.

The Agilent shares you obtained should be subtracted from the HPQ giving
you 62 shares of HPQ and 38 shares of A for the original cost basis of 54
dollars for the HPQ and a cost basis of 0 dollars for the Agilent stock
which you basically got for free from the HPQ spinoff of Agilent.

As for the Modified Dutch Auction (MDA) currently underway, you'd be a fool
to participate as the stock price will almost certainly go over 45 as soon
as the auction concludes due to the pullback of the stock. It's only
natural since the number of outstanding shares is reduced dramatically by
the buyback.

In fact, anyone who buys A today at 35 is basically printing money. Notice
you don't see any directors of the company participating in the MDA. They
are waiting for the stock to shoot up to 45 the day after the auction.

This wait-and-dump tactic should be illegal but is perfectly legal.

Patricia Kohler

"Patricia Kohler" <> wrote in message
news:...
> wrote in news:1133180873.335665.229820
> @g43g2000cwa.googlegroups.com:
>> 100 sh HP @ $5,400 x 78.04% at Agilent spinoff = $4,214.16 cost basis
>> That makes the cost basis for HWP $42.14 per share.
>> $5,400 x 21.96% = $1,185.84 cost basis for 38.14 shares
>
> You severly miscalcuated your cost basis, you twit.
>
> The Agilent shares you obtained should be subtracted from the HPQ giving
> you 62 shares of HPQ and 38 shares of A for the original cost basis of 54
> dollars for the HPQ and a cost basis of 0 dollars for the Agilent stock
> which you basically got for free from the HPQ spinoff of Agilent.
>
> As for the Modified Dutch Auction (MDA) currently underway, you'd be a
> fool
> to participate as the stock price will almost certainly go over 45 as soon
> as the auction concludes due to the pullback of the stock. It's only
> natural since the number of outstanding shares is reduced dramatically by
> the buyback.
>
> In fact, anyone who buys A today at 35 is basically printing money. Notice
> you don't see any directors of the company participating in the MDA. They
> are waiting for the stock to shoot up to 45 the day after the auction.
>
> This wait-and-dump tactic should be illegal but is perfectly legal.
>
> Patricia Kohl

This expectation of a rise to 45 is grossly wrong. The stock is repurchased
by reducing cash reserves or increasing debt to finance the purchase. The
net worth and net profit of the company are reduced while the number of
shares of the stock are similarly reduced proportionately. The book value
per share is essentially unchanged. Knowledgeable investors recognize this
and the price for a stock will seldom change much as the result of a buy
back.

SJF

B. B. wrote:
> The 0.14 of a share can just be ignored as the IRS doesn't force you
> or the 1099's to report sectional shares (just like they let you drop
> the cents in the dollars columns)

i wonder if theyd care about, say, half a share of BRK.A ?

SoCalMike wrote:
> B. B. wrote:
>> The 0.14 of a share can just be ignored as the IRS doesn't force you
>> or the 1099's to report sectional shares (just like they let you drop
>> the cents in the dollars columns)
>
> i wonder if theyd care about, say, half a share of BRK.A ?

Ever notice the little "z" under shares traded in the stock listings
there? Normally the number is share in the hundreds. For Berkshire
Hathaway it is actual shares/ Yesterday it was 110

--
To reply via e-mail please delete 1 c from paccbell

Where do you get your information that Agilent shares are essentially
free as a result of the spin off from HP? Hp's web site and written
material sent to hp holders specifically gives an allocation formula
for assigning a cost basis, definitely not 0.

jvs