DIRECTV 2009 Annual Report Download - page 99

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
the elimination of the risk that Liberty could transfer control of DIRECTV without DIRECTV public
stockholders participating in any control premium.
The holders of outstanding shares of DIRECTV Group common stock (other than direct or
indirect subsidiaries of LEI) received one share of DIRECTV Class A common stock for each share of
DIRECTV Group common stock held. The holders of outstanding shares of LEI Series A common
stock and Series B common stock (other than the Malones) received 1.11130 shares of DIRECTV
Class A common stock for each share of LEI Series A or Series B common stock held. The Malones
received 1.11130 shares of DIRECTV Class B common stock for each share of LEI Series B common
stock held. Based on these terms, DIRECTV issued 408.4 million Class A shares to the holders of
DIRECTV Group common stock other than LEI, and 501.1 million Class A and 21.8 million Class B
shares to the former LEI shareholders. The 931.3 million total Class A and Class B shares issued by
DIRECTV was 25.8 million less than the 957.1 million DIRECTV Group common shares outstanding
immediately preceding the merger, as the exchange ratio contemplated the fact that LEI would be
contributing net liabilities (excluding LEI’s interest in DIRECTV Group) to 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 in the Liberty Transaction 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 as discussed in more
detail below 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.
The following table sets forth the preliminary allocation of the purchase price to the LEI net
liabilities assumed on November 19, 2009 (dollars in millions):
Total current assets ................................................. $ 244
Property and equipment ............................................. 5
Goodwill ........................................................ 341
Investments and other assets .......................................... 754
Total assets acquired ................................................ $1,344
Total current liabilities .............................................. $2,492
Other liabilities ................................................... 305
Total liabilities assumed ............................................. $2,797
Net liabilities assumed ............................................. $1,453
Costs incurred to complete the transaction, including legal, accounting, financial printing,
investment banking and other costs, totaled $43 million and have been included as an expense in
‘‘Liberty transaction and related charges’’ in the Consolidated Statements of Operations for the year
ended December 31, 2009.
We currently expect that none of the goodwill will be deductible for tax purposes. Goodwill is
primarily related to the value of the three regional sports networks’ intangibles that do not qualify for
87