Treasury Wine Estates Limited (ASX Code: TWE) announced a pro rata accelerated renounceable entitlement offer. Under the entitlement offer, eligible institutional and retail shareholders will be entitled to subscribe for 1 new TWE shares for every 9.45 shares held as at the record date 3 November 2023. The entitlement offer price is $10.80 per new security. New securities issued under the Entitlement Offer will rank equally with existing TWE securities. Please refer to announcements made by TWE for details and the full timetables for this offer.

On trading day 3 November 2023, TWE securities will trade on an ex entitlement basis, note TWE ETOs will reflect the contract strikes/prices on a cum-entitlement basis (adjustments will be made after the close of trading 3 November 2023).

The ETO adjustment will apply the market value of the rights (whether positive or negative) determined by ASX.

For this determination ASX will use the TWE VWAP on 3 November 2023 and the entitlement offer price ($10.80).  

The indicative timetable (from the ETO’s perspective) is:

Notes:

• Participants may wish to consider making their clients, especially retail traders, aware of the issues relating to rights-style ETO adjustment for entitlement issues in relation to trading or exercise of ETOs on the ex-entitlement day.
• As with any rights-style adjustment that relies on market valuation, Participants are strongly advised that the adjustment to ETOs becomes effective on the commencement of ex-entitlement trading of the underlying securities. However, while any ETO trades entered into after the resumption of trading will be on an adjusted basis (“UA” Under Adjustment flag), the full extent of the adjustments will only be confirmed after VWAP and published by ASX after trading close on that day. Traders can estimate indicative adjustments when the market opens or during the course of the day.

Adjustment to ASX ETOs

ASX has consulted with ASXCL on the implications for TWE 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:

TC = OC + n*r/S

Where

TC        = theoretical new contract size (prior to any rounding) which is used in intermediate calculations

OC        = old contract size (currently 100)

n          = the number of entitlements or rights attributed to each OC determined by the issue ratio

r           = the market value (whether positive or negative value) of the each entitlement or right as determined by ASX, calculated as: S - d - C where:

S          = VWAP of existing securities on the first day of ex-entitlement trading when the underlying securities resumed trading (Friday, 3 November 2023), using the volume-weighted average price on ASX market

d          = ordinary dividend or distribution that the new securities are not entitled to (d=$0.00),

C          = consideration paid to exercise the implied rights (i.e. offer or subscription price) (C=$10.80),

Participants should be aware that there are certain market conditions that can lead to a negative value for ‘r’.  A negative ‘r’ used in the calculation above will create an adjustment where the contract size is adjusted downwards and the exercise price is adjusted upwards.  Please see the example of Arrium Limited “ARI”.

The new strikes are calculated as follows:

New Strike = Old Strike * OC/TC

NS = OS * OC/TC

For the strike calculations, the theoretical new contract size (TC) used by ASX is rounded to 4 decimal places, and the strike factor (OC/TC) is rounded to 6 decimal places.

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 up to but not including 102, the new contract size will be truncated to the standard 100, and a cash equalisation adjustment payment made. If the calculated new contract size falls above 102, then the new contract size will be truncated down to the nearest whole number, with 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 accelerated Renounceable Entitlement Offer with respect to open positions in ASX TWE ETO contracts.

Exercises Restricted Pending ETO Adjustment

An exercise restriction has been applied to TWE ETOs after the announcement of the entitlement offer.

The exercise restriction for TWE ETO contracts will be removed on Monday, 6 November 2023.

Auto exercise Caution

As a reminder, participants are advised that they will need to check carefully whether the adjusted TWE contracts are in-the-money or out-of-the-money in determining whether to exercise or lapse the option series.

Listing Restriction

A listing restriction has been applied from Tuesday, 31 October 2023. The listing restriction will be lifted on Monday, 6 November 2023, at Start of Day.

Under Adjustment

TWE ETO will trade under adjustment on Friday, 3 November 2023

Effective Date

A further notice will be issued after the close of business on Friday, 3 November 2023 - the resumption of the underlying security trading on an ex-entitlement basis. The notice will outline the adjusted contract size and 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

Greg Fitzpatrick, Senior Manager Clearing Operations

Contact information

ASX Clearing Operations
clearing@asx.com.au