ASX Participants and ASX Clear (ASXCL) Participants are advised that Fairfax Media Limited (ASX Code: FXJ) has announced a proposal for the separation of Domain Holdings Australia Limited (ASX Code: DHG). The proposed transaction was approved at the shareholder meeting on 2 November 2017.

The proposed separation would be effected via a distribution of DHG shares by way of an in-specie distribution of one DHG fully paid ordinary share for every ten existing FXJ shares held on 17 November 2017.

Participants are advised to refer to all announcements by FXJ for information, updates and the full timetables for the restructure proposal.

The key dates from the perspective of ETOs are as follows (indicatively):

Adjustment to ASX ETOs

ASX has consulted with ASXCL on the implications for FXJ ETOs in relation to the entitlement offer. ASX will determine the following adjustment under ASX Operating Rule [2230] Adjustments, Appendix 2230 Procedure 10 Alternative Adjustments as follows:

New contract size is calculated as follows:

NC = OC + n*r/S

Where

NC       = new contract size

OC      = old contract size (currently 100)

n          = the number of DHG shares attributed to each OC determined by the issue ratio applied to the old contract size (1 DHG: 10 FXJ)

r           = the market value of the each of the new shares as determined by ASX, using VWAP of ‘Domain’ on 16 November 2017, using the volume-weighted average price on ASX market[1] from the period ‘Domain’ commences trading

S          =VWAP of FXJ ex-entitlement to the distribution on 16 November 2017 for the period matching the ‘Domain’ VWAP period. 

The new strikes are calculated as follows:

New Strike = Old Strike * OC/NC 

The strike factor (Old Contract Size/ New Contract Size) for all contract sizes will be based on the result calculated for the standard 100 contract size.

The new contract size is calculated to the nearest four decimal points in the intermediate calculation for the new exercise price. 

Where the old contract size of a series before an adjustment is 100, ASX will apply a standardizing “TMC threshold” so that if the calculated new contract size falls between 100 and to up to but not including 102, the new contract size will be truncated to the standard 100, and a cash equalisation adjustment payment made. 

ETO Cash Equalisation Adjustment Payments for Contract Size Roundings

Participants should refer to Derivatives Notices 050/13 dated 14 August 2013, 042/13 dated 15 July 2013 and update 045/13 dated 17 July 2013 “ETO Cash Equalisation Adjustments for Contract Size Roundings” This is applied for all adjustment events effective 26 August 2013.

The cash adjustment payments will be posted by ASXCL as close as practicable to the effective adjustment date. For clarity, ETOs are LEPOs and non-LEPOs (ordinary options, American or European). Takers will be credited and writers debited a cash equalization payment for any contract size rounding calculations. (For share consolidations, it is possible for a LEPO taker to be debited if the LEPO strike is standardized back to 1 cent after initial rounding).

Where the old contract size of a series before an adjustment is 100, ASX will apply a standardizing “TMC threshold” so that if the calculated new contract size falls between 100 and to up to but not including 102, the new contract size will be truncated to the standard 100, and a cash equalisation adjustment payment made. 

OTC series (where any)

Clearing Participants are advised that any OTC series cleared by ASXCL under the ASX Equity OTC Clear service will be adjusted using the same formula as the ETOs as shown in this Derivatives Notice.

OTC series will be adjusted along with ETO adjustments on the night however, to maintain anonymity; the adjusted OTC series details will not be published in the Derivatives Notice but will be available to CPs the following morning via their own clearing systems.

ETO exercise restrictions (where any) in relation to an adjustment may occur during the period of 10 business days prior to and including expiry, will also apply to OTC series. However such exercise restrictions will not apply on expiry day of an OTC. 

Specific Cover

Participants are advised that as the contract size is changing, arrangements may need to be made for additional lodgement of underlying shares to account for any collateral denoted as specific cover.

What do I need to do by when?

Participants should be aware of the content of this Notice as it sets out the treatment of the proposed separation of DHG from FXJ with respect to open positions in ASX FXJ ETO contracts.

Exercises Restricted Pending ETO Adjustment

An exercise restriction will be applied to FXJ ETOs effective 15^th November 2017, and the restriction will be lifted effective 16^th November 2017.

Effective Date

A further notice will be issued after the close of business following the resumption of trading of the underlying securities on an ex-entitlement basis, Thursday, 16 November 2017. The notice will detail the adjusted contract size and adjusted strikes. Participants are reminded that trading on the ex-entitlement day will be on an “under adjustment” basis (UA trading) and effective that day, notwithstanding the adjusted specifications are published by ASX only after close of trading.

Need more information?

Issued by

Christina D'Amico, Senior Manager, Post Trade Operations

Contact information

Chris Mitchell
1800 623 571
cad@asx.com.au

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