In Australia, a scrip bid is a
takeover offer
In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast to the acquisi ...
where
shares
In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...
are offered partly or wholly in place of
cash
In economics, cash is money in the physical form of currency, such as banknotes and coins.
In book-keeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-i ...
. This means that, if a take over bid is accepted, shareholders in the target company will receive shares in the new merged entity. This has advantageous tax implications for investors as gains on the sale of shares
acquired on or after 19 September 1985 are subject to
capital gains tax
A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property.
In South Africa, capital g ...
. By receiving shares instead of cash the realisation of the capital asset can be delayed to take better advantage of capital loss offsets. Additionally, tax payers are only taxed on half the capital gain if they hold the asset for more than 12 months.
References
Finance in Australia
Mergers and acquisitions
{{Finance-stub