At the Annual Shareholders Meeting of CEMEX's S.A.B. de C.V. (NYSE: CX) held on April 23, 2009, its shareholders approved the proposal to increase the capital stock of the Company in its variable portion through recapitalization of retained earnings. As a result of this increase in the capital stock new shares will be issued in the ratio of one new ADS for every 25 ADSs held.
CEMEX's shareholders will receive 1 newly issued ADS for every 25 ADSs held. In case there are additional shares that do not add up to 25 ADSs, these will not receive ADS fractions nor its cash equivalent. As an example, if a shareholder owns 1,010 ADS titles, he will receive 40 newly issued ADSs.
There will be no cash distribution under any circumstance, including fractions from which no new shares can be issued.
The last day to acquire CEMEX ADSs with rights to receive new shares as a result of the increase in capital stock is May 28, 2009. CEMEX ADS will trade ex-coupon from May 29, 2009. Shareholders that have ADSs will receive the newly ADSs through their financial brokers or financial institution. Please note that one ADS equals ten of CEMEX's CPOs, which are traded on the Mexican Stock Exchange.
The new issued shares will be distributed starting June 3, 2009.
The receipt of ADSs from the recapitalization of retained earnings will not be subject to any Mexican dividend withholding tax. For U.S. federal income tax purposes, no taxable income will need to be recorded based on receipt of ADSs from the recapitalization of retained earnings by any individual or corporate resident of the United States (or any other person or entity subject to U.S. federal income tax on a net income basis).
The basis of shares in a corporation (new shares) received in a non-taxable distribution made with respect to previously held shares (old shares) in that corporation generally is determined by apportioning the basis of the old shares among the old shares and the new shares, i.e., the new basis of each share is determined by dividing the basis of the old shares by the total number of old and new shares. For example, assume an investor owns one hundred shares in a corporation (old shares) with a basis of $100 and receives, in a non-taxable distribution made with respect to the old shares, four additional shares in the corporation (new shares). The investor will divide its original $100 basis by the 104 old and new shares the investor owns after the distribution so that each of the 104 shares held after the distribution will have a basis of $0.9615. The investor's holding period for the new shares includes the holding period of the old shares.
We are not qualified to make individual investor tax/cost basis determinations. Investors are urged to consult independent tax advisors regarding the application of these rules in their particular circumstances.
For more information on the ADSs to be received from the 2009 recapitalization of retained earnings, please click here.
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