UPDATE (21/11/2018) - Participants are advised that a listing restriction will be applied for FXJ and NE9 Options from Wednesday, 21/11/2018 and Thursday, 29/11/2018 respectively. The listing restriction will be lifted for NEC options from Monday, 10/12/2018. The Jan 2019, March 2019, April 2019, June 2019, December 2019 and March 2020 ETO series will be terminated. 

Participants are also reminded that there are two contract sizes exist for FXJ options (100 and 151).  The same adjustment fomula will be applied to all contracts.

ASX Participants and ASX Clear (ASXCL) Participants are advised for the following implications of the scheme of arrangement of the proposed combination of Fairfax Media Limited (ASX Code: FXJ) and Nine Entertainment Co. Holdings Limited (ASX Code: NEC). The Scheme is subject to shareholders and final court approvals. 

Nine will acquire all of the Fairfax Shares under the scheme and Fairfax shareholders will receive 0.3627 New Nine Shares and $0.025 in cash for each Fairfax Share held at the Scheme Record date.

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

Scrip and Cash Offer Adjustment

Provided the Scheme Offer is effective, ASX will, after the close of business on the last date of trading of Fairfax shares (Wednesday, 28 November 2018), adjust Open Positions in FXJ Options under ASX Market Rule 11.3 Procedure 10 as follows:

• The option code will become NE9.  The Underlying Securities will become NECN shares;

  OC = old contract size    

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

        = the final number of NEC shares under the share component

        = 0.3627*100 = 36.27, using old contract size of 100

  NC = Adjusted new contract size (after rounding) = 36

  The difference, due to rounding, between the theoretical new contract size and the adjusted new contract size, will be cash adjusted using the ETO cash equalization adjustment payment formula detailed in the final notice.         

• the strike price in each Series will be adjusted for the Cash component, and in reflection of the reduction of the cash amount, using the following formula:

            New Strike Price = (Old Strike Price - $0.025)*(OC/TC)

                                         = (Old Strike Price - $0.025)*(OC/TC) 

  In the adjustment method for the Scrip and Cash Offer under a merger, the value of the total exercise after the adjustment is equal to the value of the total exercise before the adjustment less the amount of cash. This will be applied by ASX for a scrip and cash offer when a company is no longer a going concern under a merger scheme.

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 combination of FXJ and NEC with respect to open positions in ASX FXJ ETO contracts.

When Effective

The adjustment to NE9 ETOs will be effective on Thursday 29 November 2018.

Following the end of deferred settlement trading, from Monday, 10 December 2018, NECN will trade as NEC on a normal settlement basis and merge with existing shares. The Options Code for ex-FXJ ETOs will then change from NE9 to NEC. 

Restriction on Exercise

Exercise of FXJ ETOs will be restricted on the last day of trading of FXJ Shares (indicatively Wednesday, 28 November 2018).

Exercise of NE9 ETOs will be restricted on the last day of deferred trading of new NEC Shares (indicatively Friday, 07 December 2018)

A further notice will be issued after the close of business on the last date of trading of FXJ shares Wednesday, 28 November 2018. The notice will detail the adjusted contract size and adjusted strikes.

Need more information?

Issued by

Brendan Laird, Senior Manager, Post Trade Operations

Contact information

Cheng Zhang
1800 623 571
cad@asx.com.au

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