Acquisitions |
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| Acquisitions |
(5)Acquisitions Formula1 On September7, 2016, Liberty, through its indirect wholly owned subsidiary Liberty GR Cayman Acquisition Company, entered into two definitive stock purchase agreements relating to the acquisition of Delta Topco, the parent company of Formula1, a global motorsports business, from a consortium of sellers led by CVC Capital Partners (“CVC”). The transactions contemplated by the first purchase agreement were completed on September7, 2016 and provided for Liberty’s acquisition of slightly less than a 20% minority stake in Formula1 on an undiluted basis for $746million, funded entirely in cash (which is equal to $821million in consideration less a $75million holdback that was repaid by Liberty to selling stockholders upon completion of the Second Closing). On October27, 2016, under the terms of the first purchase agreement, Liberty acquired an additional incremental equity interest of Delta Topco, maintaining Liberty’s investment in Delta Topco on an undiluted basis and increasing slightly to 19.1% on a fully diluted basis. On January23, 2017, Liberty acquired 100% of the fully diluted equity interests of Delta Topco, other than a nominal number of shares held by certain Formula1 teams, in a second closing under the second purchase agreement (and following the unwind of the first purchase agreement). Prior to the Second Closing, CVC continued to be the controlling shareholder of Formula1, and Liberty did not have any voting interests or board representation in Formula1. As a result, Liberty concluded that it did not have significant influence over Formula1, and therefore our initial investment in Formula1 was accounted for as a cost investment until the completion of the Second Closing, at which time we began consolidating Formula1. The transaction price for the acquisition represents an enterprise value for Formula1 of approximately $8.0 billion and an equity value of approximately $4.4 billion, calculated at the time of the first closing. The total consideration at the time of closing was $4.7 billion, comprised of $3.05 billion of cash (including the investments made under the first purchase agreement during 2016) and approximately $1.6 billion of non-cash consideration represented by approximately 56million newly issued shares of SeriesC Liberty Formula One common stock. In connection with the transaction, Liberty entered into a $500million margin loan on November8, 2016, secured by shares of Live Nation and other public equity securities held by Liberty (the ‘‘Live Nation Margin Loan’’). No amounts were drawn on the Live Nation Margin Loan at December31, 2016. Liberty drew approximately $350million to use for the purchase of Formula1, on January23, 2017. See note10 for additional discussion regarding the Live Nation Margin Loan. At the Second Closing, the Company issued 62million new shares of SeriesC Liberty Formula One common stock, which were subject to market co-ordination and lock-up agreements, to certain third party investors at a price per share of $25.00. As a result, the stock component of the consideration payable to the selling shareholders in the Formula1 acquisition was decreased by 62million shares, and the cash component of the consideration payable to the selling shareholders in the Formula1 acquisition was increased by $1.55 billion. Also concurrently with the Second Closing, the Company used a portion of the net proceeds of its $450million cash offering of 1% Cash convertible Notes due 2023, as discussed in note10, to increase the cash consideration payable to the selling shareholders by approximately $400million. The additional 19million shares of SeriesC Liberty Formula One common stock that would otherwise have been issued to the selling shareholders based on the per share purchase price of $21.26 were held in reserve by the Company for possible sale to the Formula1 teams, until such opportunity expired in July of 2017. In connection with the Second Closing, Delta Topco issued $351million subordinated exchangeable notes, upon the conversion of certain outstanding Delta Topco loan notes, that bear interest at 2%per annum and mature in July 2019, exchangeable into cash or newly issued shares of SeriesC Liberty Formula One common stock (“Exchangeable Notes”). See note10 for additional discussion of this debt instrument. The final acquisition price allocation for Formula1 is as follows:
Goodwill is calculated as the excess of the consideration transferred over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, value associated with future customers, continued innovation and noncontractual relationships. Formula1 amortizable intangible assets were comprised of an agreement with the Fédération Internationale de l’Automobile (the “FIA,” and the agreement, the “FIA Agreement”) ($3.6 billion with a remaining useful life of approximately 35 years) and customer relationships of $1.9 billion with a weighted average remaining life of approximately 11.5 years. The FIA owns the World Championship and has granted Formula1 the exclusive commercial rights to the World Championship until the end of 2110. During the fourth quarter of 2017, the preliminary purchase price allocation was adjusted, resulting in increases of $22million to other assets and $11million to other liabilities assumed and decreases of $12million to goodwill and $1million to deferred tax liabilities. None of the acquired goodwill is expected to be deductible for tax purposes. As of December31, 2017, the valuation related to the acquisition of a controlling interest in Formula1 and the acquisition price allocation are final. Included in net earnings (loss) for the year ended December31, 2017 is $261million related to Formula1’s operations since the date of acquisition. The unaudited pro forma revenue and net earnings of Liberty, prepared utilizing the historical financial statements of Formula1, giving effect to acquisition accounting related adjustments made at the time of acquisition, as if the acquisition of Formula1 discussed above occurred on January1, 2016, are as follows:
The pro forma results include adjustments primarily related to the amortization of acquired intangible assets. The pro forma information is not representative of the Company’s future results of operations nor does it reflect what the Company’s results of operations would have been if the acquisition of Formula1 had occurred previously and the Company consolidated Formula1 during the periods presented. |
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