Examples Illustrating Merger Tax Consequences to Former T-3 Energy Services, Inc. Shareholders

Transcription

1 Information Required by Treasury Regulation B-1 Posted to Robbins & Myers, Inc. web site on February 7, 2011 Issuer: Robbins & Myers Inc. Symbol: RBN IRS Employer Identification Number: Organizational Action: January 7, 2011 meeting of Robbins & Myers shareholders to vote on the issuance of R&M shares to be received by the shareholders of T-3 Energy Services, Inc. (T- 3) as partial consideration in connection with the merger by which T-3 became a wholly-owned subsidiary of R&M. The acquisition was consummated by the merger of a wholly-owned subsidiary of R&M, Triple Merger I, with and into T-3, with T-3 as the surviving corporation. Title of Class of Securities: Robbins & Myers Common Stock CUSIP Number: Address: 51 Plum Street, Suite 260, Dayton, Ohio Phone Number: Contact: Chris Hix, Vice President and Chief Financial Officer (chris.hix@robn.com) Applicable Internal Revenue Code Provisions: Section 356 and 358 Reportable Tax Year: 2011 Overview Examples Illustrating Merger Tax Consequences to Former T-3 Energy Services, Inc. Shareholders This document provides examples illustrating how a former shareholder of T-3 Energy Services, Inc. ( T-3 ) would calculate, for U.S. federal income tax purposes, taxable gains on the merger, as well as the tax basis of the new Robbins & Myers, Inc. ( R&M ) shares received in the merger. The examples are for individuals who are citizens or residents of the United States, purchased all of their T-3 shares for cash and held those shares as a capital asset (generally, for investment purposes). The examples do not address any special tax rules that may apply (including shares received as compensation), nor do they address the consequences of any state, local, or foreign tax laws. Important Notice The examples are not meant to provide you with tax advice and you should not rely on them. Your tax consequences depend on your individual circumstances and could differ significantly from those Page 1 of 9

2 in the examples. You should consult your own tax advisor regarding the specific tax consequences of the merger to you in light of your own tax circumstances. These examples are provided for illustrative purposes only and do not replace the discussion of tax consequences contained on pages in the joint proxy statements/prospectus dated December 3, 2010 and distributed to T-3 stockholders of record on November 26, The Material U.S. Federal Income Tax Consequences to U.S. Holders of T-3 Stock presented in the joint proxy statements/prospectus is copied below. Calculations If these examples are applicable to you (as discussed above), your taxable gain on the merger and the tax basis of the new R&M shares received in the merger are calculated as follows: Step 1: Calculate the Original Cost Basis in T-3 Shares. The cost basis generally equals the amount you paid for your T-3 shares. Step 2: Calculate the Total Consideration Received in the Merger. The total merger consideration equals (1) the fair market value of the R&M shares that you receive in the merger, including any fractional share (using the $41.18 closing price on January 7, the business day immediately preceding the merger) plus (2) the amount of cash (excluding any cash in lieu of a fractional share) that you received in the merger. Step 3: Calculate the Taxable Gain or Loss Realized in the Merger. The realized gain or loss equals (1) the total merger consideration (as determined in Step 2), minus (2) the cost basis in your T-3 common stock (as determined in Step 1). Step 4: Calculate the Taxable Gain Recognized in the Merger. The recognized gain equals the lesser of (1) the cash you received in the merger (excluding any cash in lieu of fractional shares) and (2) the total gain realized on your T-3 shares (as determined in Step 3). You will not be permitted to recognize a loss. Step 5: Calculate the Total Basis in New R&M Common Stock. Your total basis in the new R&M common stock received in the merger equals (1) the original cost basis in your T-3 shares (as determined in Step 1), minus (2) the cash you received in the merger (excluding any cash received in lieu of fractional shares), plus (3) the taxable gain you recognized in the merger, if any (as determined in Step 4). Step 6: Calculate the Taxable Gain or Loss Recognized on any Fractional Shares. Your gain or loss on the exchange of any fractional R&M share for cash equals (1) the cash you received in exchange for the fractional share (determined by multiplying the fractional share interest that you otherwise would be entitled by the $41.18 closing price per R&M shares on January 7, 2011), minus (2) your basis in the fractional share (determined based on the calculation in Step 5). Step 7: Calculate the Total Basis in Remaining R&M Shares. Your total basis in the remaining R&M shares equals (1) your basis in the R&M shares received in the merger (including any fractional shares) (as determined in Step 5), minus (2) your basis in the fractional shares (as determined in Step 6). Page 2 of 9

3 If you owned multiple blocks of T-3 shares purchased at different share prices, you will calculate your gain on a block-by-block basis. You should consult your tax advisor regarding your basis in the R&M shares received in exchange for multiple blocks of T-3 shares. Assumptions for Examples The following three examples utilize the calculations described above and are for illustrative purposes only and should not be considered tax advice. In each example, it is assumed that you owned 100 shares of T-3 common stock at the time of the merger and that such shares were purchased at one time as a block at the same price. It is also assumed, for purposes of calculating the total consideration received in the merger (Step 2), that the fair market value of any new R&M shares received in the merger was $41.18 per share, the closing price on January 7, 2011 the business day immediately preceding the merger. In each example, you would have been entitled to approximately 89 R&M shares (100 T-3 shares times the stock exchange ratio) and $ in cash (the sum of $795 (100 T-3 shares times the $7.95 cash ratio) and $16.47 cash payment in lieu of a fractional share ($41.18 times.4)). The examples differ as to your original cost basis in T-3 shares. In Example 1, you are assumed to have had an original basis of $20 per in each T-3 share. In Example 2, your basis is assumed to be $40 per share, while in Example 3, your basis is assumed to be $55 per share. Example 1: Step 1: Original Cost Basis in T-3 Shares 100 shares x $20/share $ Step 2: Total Consideration Received in the Merger Stock Merger Consideration (89.4 R&M shares x $41.18) $ 3, Plus: Cash Merger Consideration (100 T-3 shares x $7.95) Step 3: Taxable Gain or Loss Realized in the Merger Less: Original Cost Basis of T-3 shares (2,000.00) Total Gain Realized $ 2, Step 4: Taxable Gain Recognized in the Merger Taxable Gain Recognized (Lesser of Total Gain Realized or Cash Merger Consideration) $ Step 5: Total Basis in New R&M Shares Original Cost Basis in T-3 shares $ 2, Less: Cash Merger Consideration (795.00) Plus: Taxable Gain Recognized Basis in New R&M Shares (89.4 shares) $ 2, Page 3 of 9

4 Step 6: Taxable Gain or Loss Recognized on Fractional Share Cash Paid in Lieu of Fractional Share (0.40 x $41.18) $ Less: Basis Attributable to Fractional Share [(0.40/89.4) x $2,000)] (8.95) Taxable Gain on Fractional Share $ 7.52 Step 7: Total Basis in the Remaining R&M Shares Basis in New R&M shares (89.4 shares) $ 2, Less: Basis Attributable to Fractional Share (from Step 6) (8.95) Basis in Remaining R&M Shares (89 shares) $ Per Share Basis ($1,991.05/89 shares) $ In this example, you would report a total taxable gain of $ ($795 plus $7.52) from the merger, and you would have a tax basis of $1, in the 89 R&M shares that you received. This calculation is for illustrative purposes only and should not be considered tax advice. Specific questions about your unique situation should be discussed with your tax advisor. Example 2: Step 1: Original Cost Basis in T-3 Shares 100 shares x $40/share $ Step 2: Total Consideration Received in the Merger Stock Merger Consideration (89.4 R&M shares x $41.18) $ 3, Plus: Cash Merger Consideration (100 T-3 shares x $7.95) Step 3: Taxable Gain or Loss Realized in the Merger Less: Original Cost Basis of T-3 shares (4,000.00) Total Gain Realized $ Step 4: Taxable Gain Recognized in the Merger Taxable Gain Recognized (Lesser of Total Gain Realized or Cash Merger Consideration) $ Step 5: Total Basis in New R&M Shares Original Cost Basis in T-3 shares $ 4, Less: Cash Merger Consideration (795.00) Plus: Taxable Gain Recognized Basis in New R&M Shares (89.4 shares) $ Page 4 of 9

5 Step 6: Taxable Gain or Loss Recognized on Fractional Share Cash Paid in Lieu of Fractional Share (0.40 x $41.18) $ Less: Basis Attributable to Fractional Share [(0.40/89.4) x $4,000)] (17.90) Loss on Fractional Share $ (1.43) Step 7: Total Basis in the Remaining R&M Shares Basis in New R&M shares (89.4 shares) (from Step 5) $ Less: Basis Attributable to Fractional Share (from Step 6) (17.90) Basis in Remaining R&M Shares (89 shares) $ 3, Per Share Basis ($3,663.59/89 shares) $ In this example, you would report a taxable gain of $ and a $1.43 capital loss from the merger, and you would have a tax basis of $3, in the 89 R&M shares that you received. This calculation is for illustrative purposes only and should not be considered tax advice. Specific questions about your unique situation should be discussed with your tax advisor. Example 3: Step 1: Original Cost Basis in T-3 Shares 100 shares x $55/share $ 5, Step 2: Total Consideration Received in the Merger Stock Merger Consideration (89.4 R&M shares x $41.18) $ 3, Plus: Cash Merger Consideration (100 T-3 shares x $7.95) Step 3: Taxable Gain or Loss Realized in the Merger Less: Original Cost Basis of T-3 shares (5,500.00) Total Loss Realized $ 1, Step 4: Taxable Gain Recognized in the Merger No Gain Recognized/No Loss Allowed $ 0.00 Step 5: Total Basis in New R&M Shares Original Cost Basis in T-3 shares $ 5, Less: Cash Merger Consideration (795.00) Plus: Taxable Gain Recognized 0.00 Basis in New R&M Shares (89.4 shares) $ 4, Step 6: Taxable Gain Recognized or Loss Allowed on Fractional Share Cash Paid in Lieu of Fractional Share (0.40 x $41.18) $ Page 5 of 9

6 Less: Basis Attributable to Fractional Share [(0.40/89.4) x $5,500)] (24.61) Loss Allowed on Fractional Share ($ 8.14) Step 7: Total Basis in the Remaining R&M Shares Basis in New R&M shares (89.4 shares) (from Step 5) $ 4, Less: Basis Attributable to Fractional Share (from Step 6) (24.61) Basis in Remaining R&M Shares (89 shares) $ 4, Per Share Basis ($4,680.39/89 shares) $ In this example, you would report no gain and small capital loss only with respect to the fractional share and the inherent loss not allowed ($1, less $8.14=$ ) remains inherent in the 89 R&M shares, and you would have a tax basis of $4, in the 89 R&M shares that you received. This calculation is for illustrative purposes only and should not be considered tax advice. Specific questions about your unique situation should be discussed with your tax advisor. Material U.S. Federal Income Tax Consequences to U.S. Holders of T-3 Stock The following discussion summarizes the material U.S. federal income tax consequences of the merger to you, if you are a U.S. Holder of T-3 Common Stock, assuming the merger qualifies as a reorganization within the meaning of Section 368(a) of the Code. You generally will recognize gain, but not loss, equal to the lesser of (a) the amount of cash received in the merger and (b) the excess, if any, of (i) the sum of the cash plus the fair market value of the Robbins & Myers Common Shares received in the merger, determined as of the closing date of the merger, over (ii) your tax basis in the T-3 shares surrendered in the merger. For this purpose, you must calculate the gain or loss separately for each identifiable block of T-3 shares that are surrendered pursuant to the merger. If you acquired different blocks of T-3 Common Stock at different times or different prices, you should consult your tax advisor regarding the manner in which gain or loss should be determined. Any gain recognized generally will be treated as capital gain, and such capital gain will constitute long term capital gain if you held your T-3 shares for more than one year as of the closing date of the merger. In some cases, if you actually or constructively own Robbins & Myers Common Shares other than the Robbins & Myers Common Shares received in the merger, the recognized gain could be treated as having the effect of the distribution of a dividend. See Possible Treatment of Cash as Dividend below in this section. The aggregate tax basis in the Robbins & Myers Common Shares received pursuant to the merger (including any fractional share deemed received and exchanged for cash) will equal the aggregate tax basis in the shares of T-3 Common Stock surrendered in the merger, decreased by the amount of cash received (excluding any cash received in lieu of a fractional Common Share of Robbins & Myers), and increased by the amount of gain, if any, recognized (excluding any gain recognized with respect to cash received in lieu of a fractional Common Share of Robbins & Myers) or any amount treated as a dividend. The holding period of the Common Shares of Robbins & Myers received in the merger (including any fractional share deemed received and exchanged for cash) will include the holding period of the shares of T-3 Common Stock surrendered in the merger. If you Page 6 of 9

7 have differing tax bases and/or holding periods with respect to the T-3 Common Stock exchanged, you should consult with a tax advisor in order to identify the tax bases and/or holding periods of the particular Robbins & Myers Common Shares received pursuant to the merger. Holders of shares of T-3 Common Stock who receive cash in lieu of fractional Common Shares of Robbins & Myers will be treated as having received such fractional shares in the merger, and then as having exchanged such fractional shares for cash in a redemption by Robbins & Myers. The amount of any gain or loss recognized as a result of such exchange will be equal to the difference between the ratable portion of the tax basis of T-3 Common Stock exchanged in the merger that is allocated to such fractional shares and the cash received in lieu thereof, and will constitute long-term capital gain or loss if the shares of T-3 Common Stock exchanged have been held by the holder for more than one year at the time of the exchange. If the merger fails to qualify as a reorganization, the merger will be a fully taxable transaction to T-3 stockholders. In such case, T-3 stockholders will recognize gain or loss measured by the difference between the total consideration received in the merger and the T-3 stockholder s tax basis in the shares of T-3 Common Stock surrendered in the merger. The aggregate tax basis in the Robbins & Myers Common Shares received pursuant to the merger will be equal to the fair market value of such Common Stock as of the closing date of the merger. The holding period of such Robbins & Myers Common Shares will begin on the date immediately following the closing date of the merger. Possible Treatment of Cash as Dividend. There are certain circumstances in which all or part of the cash received by a holder of T-3 Common Stock would be treated as a dividend rather than as capital gain. In general, the determination of whether the gain recognized in the merger will be treated as capital gain or dividend income will depend upon whether and to what extent the exchange in the merger reduces the T-3 stockholder s deemed percentage share ownership interest in Robbins & Myers. For purposes of this determination, a T-3 stockholder will be treated as if it first exchanged all of its T-3 Common Stock solely for Robbins & Myers Common Shares and then Robbins & Myers immediately redeemed a portion of those Robbins & Myers Common Shares in exchange for the cash that the T-3 stockholder actually received. In determining whether the receipt of cash has the effect of a distribution of a dividend, the constructive ownership rules of Section 318(a) of the Code must be taken into account. The IRS has indicated in a published ruling that any reduction in the interest of a minority stockholder that owns a small number of shares in a publicly and widely-held corporation and that exercises no control over corporate affairs would result in capital gain as opposed to dividend treatment. T-3 stockholders are urged to consult their tax advisors about the possibility that all or a portion of the cash received in exchange for T-3 Common Stock will be treated as a dividend, based on the holders specific circumstances (e.g., holders that are corporations should consult their tax advisors regarding the potential applicability of the extraordinary dividend provisions of the Code). Treatment of Capital Gains and Losses and Qualified Dividends. Capital gain of a noncorporate U.S. Holder generally will be subject to tax at a maximum long-term capital gain tax rate that is scheduled to increase to 20% for taxable years beginning on or after January 1, 2011 if the T- 3 shares were held for more than one year when the merger occurs. Short-term capital gain on stock held for one year or less may be taxed at regular rates, which are scheduled to increase to a maximum rate of 39.6% for taxable years beginning on or after January 1, The deduction of any capital loss is subject to limitations of general application. Page 7 of 9

8 Any portion of gain recognized in the merger by a non-corporate stockholder that is treated as a dividend generally will be taxable at a maximum rate that is scheduled to increase to 39.6% for taxable years beginning on or after January 1, Reporting Requirements. T-3 stockholders receiving Robbins & Myers Common Shares in the merger must file a statement with their U.S. federal income tax returns setting forth their tax basis in the T-3 Common Stock exchanged in the merger and the fair market value of the Robbins & Myers Common Shares and the amount of cash received in the merger. In addition, holders will be required to retain permanent records of these facts relating to the merger. Material Tax Consequences of the Merger to Robbins & Myers, Robbins & Myers Shareholders and T-3 Neither Robbins & Myers, nor Robbins & Myers shareholders (who are not also T-3 stockholders), nor T-3 will recognize any gain or loss as a result of the merger. Information Reporting and Backup Withholding Certain U.S. Holders may be subject to information reporting with respect to the cash received in exchange for shares of T-3 Common Stock. U.S. Holders who are subject to information reporting and who do not provide appropriate information when requested may also be subject to backup withholding at a rate of 31% commencing on January 1, 2011 with respect to cash received in the merger (including in exchange for fractional Common Shares of Robbins & Myers). Backup withholding will not apply, however, to a U.S. Holder that (1) furnishes a correct taxpayer identification number and (as applicable) certifies under penalties of perjury (a) that the taxpayer identification number is correct and (b) that such U.S. Holder is not subject to backup withholding due to notified payee underreporting on the substitute Form W-9 or successor form included in the letter of transmittal that will be sent to T-3 stockholders following the consummation of the merger, or (2) is otherwise exempt from backup withholding. In general, backup withholding and information reporting will not apply to payments made to a Non-U.S. Holder if such holder has provided the required certification that the holder is not a U.S. person on IRS Form W-8BEN, IRS Form W-8ECI, IRS Form W-8EXP, or IRS Form W-8IMY, as applicable, provided Robbins & Myers does not have actual knowledge that such holder is a U.S. person. In addition to being subject to backup withholding, if you do not provide Robbins & Myers (or the exchange agent) with your correct taxpayer identification number, you may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax, and any amount withheld under the backup withholding rules may be refunded or credited against such a holder s federal income tax liability, provided that the required information is properly furnished in a timely manner to the Internal Revenue Service. The summary of material U.S. federal income tax consequences of the merger set forth above is intended to provide only a general summary and is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. In addition, the summary does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, the summary does not address any non- U.S. federal income tax or any foreign, state, local or other tax consequences of the merger. Page 8 of 9

9 Accordingly, T-3 stockholders are urged to consult their own tax advisors to determine the particular federal, state, local or foreign income, reporting or other tax consequences of the merger to that stockholder. Page 9 of 9