DIRECTV 2011 Annual Report Download - page 94

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
approximately $2.1 billion of indebtedness and a related series of equity collars, LEI’s other tangible and intangible assets acquired and liabilities assumed based on
became wholly-owned subsidiaries of DIRECTV. their estimated acquisition date fair values, with any excess being treated as
goodwill. The assets, liabilities and results of operations of LEI have been
DIRECTV Group entered into the Liberty Transaction to eliminate the consolidated beginning on the acquisition date, November 19, 2009.
approximate 57% ownership interest in DIRECTV Group held by Liberty Media,
thereby reducing the concentration of voting power in a single stockholder or group The following table sets forth the final allocation of the purchase price to the
of affiliated stockholders. The merger also resulted in greater liquidity of the LEI net liabilities assumed on November 19, 2009 (dollars in millions):
DIRECTV common stock, greater operating and governance independence and the
elimination of the risk that Liberty could transfer control of DIRECTV without Total current assets ..................................... $ 244
DIRECTV’s public stockholders participating in any control premium. Property and equipment ................................. 5
Goodwill ........................................... 295
The holders of outstanding shares of DIRECTV Group common stock (other Investments and other assets .............................. 754
than direct or indirect subsidiaries of LEI) received one share of DIRECTV Class A
Total assets acquired .................................... $1,298
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 Total current liabilities .................................. $2,492
stock (other than Dr. John C. Malone and his family, or the Malones) received Other liabilities ....................................... 259
1.11130 shares of DIRECTV Class A common stock for each share of LEI Series A Total liabilities assumed .................................. $2,751
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 Net liabilities assumed ................................. $1,453
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 Costs incurred to complete the transaction, including legal, accounting,
Class A and 21.8 million Class B shares to the former LEI stockholders. The financial printing, investment banking and other costs, totaled $43 million and
931.3 million total Class A and Class B shares issued by DIRECTV was have been included as an expense in ‘‘Liberty transaction and related gains
25.8 million less than the 957.1 million DIRECTV Group common shares (charges)’’ in the Consolidated Statements of Operations for the year ended
outstanding immediately preceding the merger, as the exchange ratio contemplated December 31, 2009.
the fact that LEI would be contributing net liabilities (excluding LEI’s interest in We do not expect that goodwill will be deductible for tax purposes. Goodwill
DIRECTV Group) to DIRECTV. is primarily related to the value of the three regional sports networks’ intangibles
that do not qualify for separate recognition, such as exploitable advertising space,
The Liberty Transaction has been accounted for using the acquisition method
assembled production and distribution networks and assembled workforces.
of accounting pursuant to accounting standards for business combinations.
DIRECTV Group has been treated as the acquiring corporation in the Liberty The exchange ratio of LEI common stock to DIRECTV Group common
Transaction for accounting and financial reporting purposes, and accordingly the stock was determined in a manner such that LEI stockholders as a group received a
historical financial statements of DIRECTV Group have become the historical premium in the form of a larger economic interest in DIRECTV than would have
financial statements of DIRECTV. The acquisition date fair value of consideration been otherwise determined based on the relative fair values of DIRECTV Group
paid, in the form of DIRECTV common stock, for the assets and liabilities of LEI and LEI. This premium, calculated as the value of the economic interest in
(excluding LEI’s interest in DIRECTV Group) has been allocated to a premium DIRECTV distributed to LEI stockholders based on the fair value of the merged
expensed at the close of the transaction as discussed in more detail below and to assets of DIRECTV as of November 19, 2009, in excess of the acquisition date fair
70