Problem with Shape Merge

I want to bend some text around a hollowed out cylinder shape. I was told the best way to do this is shape merge in compound objects. I see it worked simular to boolean which I use a lot. The only problem is I can't get it to work. I select the text I want to bend round the cyclinder, then the shape merge button, then I click on pick shape from the parameters that appear and then try to select the cycliner to bend the text around it but it won't let me. What am I doing wrong here and is shape merge the best thing to use. I know there is a bend modifier but that is no good for what I want at the text will not bend perfectly to the mug shape.

Thanks,
Darren