Eversource 2013 Annual Report Download - page 85

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Purchase Price: Pursuant to the merger, all of the NSTAR common shares were exchanged at the fixed exchange ratio of 1.312 NU
common shares for each NSTAR common share. The total consideration transferred in the merger was based on the closing price of
NU common shares on April 9, 2012, the day prior to the date the merger was completed, and was calculated as follows:
NSTAR common shares outstanding as of April 9, 2012 (in thousands)*
103,696
Exchange ratio
1.312
NU common shares issued for NSTAR common shares outstanding (in thousands)
136,049
Closing price of NU common shares on April 9, 2012
$
36.79
Value of common shares issued (in millions)
$
5,005
Fair value of NU replacement stock-based compensation awards related to
pre-merger service (in millions)
33
Total purchase price (in millions)
$
5,038
* Included 109 thousand shares related to NSTAR stock-based compensation awards that vested immediately prior to the merger.
Certain of NSTAR’s stock-based compensation awards, including deferred shares, performance shares and all outstanding stock
options, were replaced with NU awards using the exchange ratio upon consummation of the merger. In accordance with accounting
guidance for business combinations, the portion of the fair value of these awards attributable to service provided prior to the merger
was included in the purchase price as it represented consideration transferred in the merger. See Note 10D, "Employee Benefits –
Share-Based Payments," for further information.
Purchase Price Allocation: The allocation of the total purchase price to the estimated fair values of the assets acquired and liabilities
assumed was determined based on the accounting guidance for fair value measurements, which defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The allocation of the total purchase price included adjustments to record the fair value of NSTAR’s unregulated
telecommunications business, regulatory assets not earning a return, lease agreements, long-term debt and the preferred stock of
NSTAR Electric. The fair values of NSTAR's assets and liabilities were determined based on significant estimates and assumptions,
including Level 3 inputs, that were judgmental in nature. These estimates and assumptions included the timing and amounts of
projected future cash flows and discount rates reflecting risk inherent in future cash flows.
In accordance with accounting guidance for business combinations, the excess of the purchase price over the estimated fair values of
the assets acquired and liabilities assumed was recognized as goodwill. The allocation of the purchase price was as follows:
(Millions of Dollars)
Current Assets
$
739
Property Plant and Equipment, Net
5,155
Goodwill
3,232
Other Long-Term Assets, excluding Goodwill
2,103
Current Liabilities
(1,330)
Long-Term Liabilities
(2,723)
Long-Term Debt and Other Long-Term Obligations
(2,099)
Noncontrolling Interest
(39)
Total Purchase Price
$
5,038
The goodwill from the merger with NSTAR of $3.2 billion was allocated to NU's reporting units based on their estimated fair values.
NU's reporting units consist of Electric Distribution, Electric Transmission and Natural Gas Distribution. See the "Goodwill" section
below for the allocation of goodwill to each reporting unit.
Pro Forma Financial Information: The following unaudited pro forma financial information reflects the pro forma combined results of
operations of NU and NSTAR and reflects the amortization of purchase price adjustments assuming the merger had taken place on
January 1, 2011. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily
indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of
NU.
For the Years Ended December 31,
(Pro forma amounts in millions, except per share amounts)
2012
2011
Operating Revenues
$
7,004
$
7,361
Net Income Attributable to Controlling Interest
630
689
Basic EPS
2.00
2.20
Diluted EPS
1.99
2.19