DIRECTV 2009 Annual Report Download - page 59

DIRECTV
SIGNIFICANT TRANSACTIONS AFFECTING THE COMPARABILITY OF THE RESULTS OF
OPERATIONS
Acquisitions
Liberty Transaction. On November 19, 2009, The DIRECTV Group, Inc., or DIRECTV Group,
and Liberty Media Corporation, which we refer to as Liberty or Liberty Media, obtained shareholder
approval of and closed a series of related transactions which we refer to collectively as the Liberty
Transaction. The Liberty Transaction included the split-off of certain of the assets of the Liberty
Entertainment group into Liberty Entertainment, Inc., or LEI, which was then split-off from Liberty.
Following the split-off, DIRECTV Group and LEI merged with subsidiaries of DIRECTV. As a result
of Liberty Transaction, DIRECTV Group, which is comprised of the DIRECTV U.S. and DIRECTV
Latin America businesses, and LEI, which held Liberty’s 57% interest in DIRECTV Group, a 100%
interest in three regional sports networks, a 65% interest in Game Show Network, LLC, approximately
$120 million in cash and cash equivalents and approximately $2.1 billion of indebtedness and a series of
related equity collars became wholly-owned subsidiaries of DIRECTV.
The Liberty Transaction has been accounted for using the acquisition method of accounting
pursuant to accounting standards for business combinations. DIRECTV Group has been treated as the
acquiring corporation for accounting and financial reporting purposes, and accordingly the historical
financial statements of DIRECTV Group have become the historical financial statements of DIRECTV.
The acquisition date fair value of consideration paid, in the form of DIRECTV common stock, for the
assets and liabilities of LEI (excluding LEI’s interest in DIRECTV Group) has been allocated to a
premium expensed at the close of the transaction and to LEI’s other tangible and intangible assets
acquired and liabilities assumed based on their estimated acquisition date fair values, with any excess
being treated as goodwill. The assets, liabilities and results of operations of LEI have been consolidated
beginning on the acquisition date, November 19, 2009.
As a result of the Liberty Transaction, we recorded $491 million in charges to ‘‘Liberty transaction
and related charges’’ in the Consolidated Statements of Operations for the year ended December 31,
2009, which is comprised of: a $337 million charge related to a premium paid to LEI shareholders to
complete the merger in the form of an equity interest that exceeded the fair value of net assets
acquired by DIRECTV; $43 million of costs incurred to complete the transaction, including legal,
accounting, financial printing, investment banking and other costs; and $111 million in net losses
recorded for the partial settlement of the equity collars and stock options and stock appreciation rights
held by Liberty employees subsequent to the acquisition date, and adjustments of the equity collars and
stock options and stock appreciation rights carried as liabilities to fair value as of December 31, 2009.
As part of the Liberty Transaction, we assumed a credit facility with a principal balance of
$1,878 million, which we refer to as the Collar Loan, and a series of related equity collars which were
in a liability position with an estimated acquisition date fair value of $369 million. In connection with
the assumption of the Collar Loan, we agreed with the lending bank to promptly repay the Collar Loan
and settle the equity collars, which is based on DTV shares. From the acquisition date to December 31,
2009, we repaid a total of $751 million, including $676 million in principal payments and $75 million in
payments to settle a portion of the equity collars.
Cash paid, net of cash acquired in connection with the transaction was $97 million and includes a
$226 million repayment of LEI’s existing loan from Liberty at the close of the transaction and
$43 million of cash paid for transaction costs, partially offset by $120 million in cash at LEI, and
$56 million of cash at the regional sports networks.
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