INTL FCStone 2011 Annual Report Download - page 108

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INTL FCSTONE INC.Form10K94
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
seventy ve percent (75%) of the fair value of the common stock
of the Company as of June30,2013. e maximum number
of restrictedshares issuable upon the exercise of the Option is
187,500shares. e restrictedshares will be subject to restrictions
on transfer which will lapse at the rate of one-third per year
over the three year period commencing on June30,2013. e
Option Agreement was included in determining the fair value
of the contingent consideration.
e Company obtained a third-party valuation of the intangible
assets and contingent liabilities, and allocated the purchase
costs among tangible assets, identifi ed intangible assets, with
determinable useful lives, intangible assets with indefi nite lives
and goodwill. Purchase costs allocated to intangible assets with
determinable useful lives are amortized over the remaining useful
lives of the assets. e intangible assets and goodwill recognized
in this transaction were assigned to the C&RM segment. e
intangible assets recognized include customer relationships of
$0.2million (5 year useful life); software programs and platforms
of $1.2million (5 year useful life), non-compete agreements of
$2.9million (3 year useful life) and trade name of $0.1million
(indefi nite useful life). Goodwill is calculated as the excess of the
fair value of the consideration transferred over the fair value of
the identifi ed net assets acquired and liabilities assumed. Purchase
costs allocated to goodwill were $18.7million. e Company’s
consolidated fi nancial statements include the operating results
of the Hanley Companies from the date of acquisition.
As part of the acquisition of the Hanley Companies, the Company
acquired a majority interest in the Blackthorn Multi-Advisor Fund,
LP (“Blackthorn Fund”). e Blackthorn Fund is a commodity
investment pool, which allocates most of its assets to third-party
commodity trading advisors and other investment managers. e
Blackthorn Fund engages in the speculative trading of a wide
variety of commodity futures and option contracts, securities
and other fi nancial instruments. In addition to the majority
interest that was acquired, a subsidiary of the Company is also the
general partner of the Blackthorn Fund. Under the provisions of
the Consolidations Topic of the ASC, the Company is required
to consolidate the Blackthorn Fund as a variable interest entity
since it is the general partner and owns a majority interest. e
creditors of the Blackthorn Fund have no recourse to the general
assets of the Company.
Provident Group
In September2010, the Company acquired certain assets of
Provident Group (“Provident”), a NewYork-based investment
banking and advisory fi rm. Under terms of the acquisition
agreement, the Company acquired assets secured the services of
the individual sellers, as set forth in the agreement. Provident is
engaged in the business of providing investment banking services.
Provident will play a critical role in building out a comprehensive
investment banking and advisory platform delivering fi nancing
solutions to the middle market.
e purchase price for the assets and services of the sellers was
$5.0million. Subsequent to closing, the individual sellers placed
the $5.0million purchase price into an escrow account and the
funds were used to purchase outstandingshares of the Company
on the open market. ere were 214,325shares purchased and
placed into escrow as a result of this agreement, with 8,700shares
being purchased during 2010, and 205,625shares being purchased
during 2011. e $5.0million purchase price was recorded
as a reduction in additional paid in capital asshares held in
escrow for business combinations. eshares held in escrow
for business combinations will be released to the individual
sellers, over a fi ve year period from the date of closing based on
net profi ts, in accordance with the provisions of the acquisition
agreement. As dividend and voting rights on theseshares reside
with the sellers throughout the time they are held in escrow,
they are considered participating securities under the two-class
method. Upon the release of theshares, they will be owned by
the individual sellers free and clear of any further encumbrance
under the acquisition agreement or the custody agreement and
the Company will reduce theshares held in escrow for business
combinations amounts. However, if the terms of the agreement
are not met, the remainingshares will be forfeited and the
remainingshares and balance in theshares held in escrow for
business combinations will be recorded as treasury stock. During
the year ended September30,2011, 2,840shares were earned
and subsequently released to the sellers.
e Company obtained a third-party valuation of the intangible
assets and allocated the purchase costs among tangible assets, an
identifi ed intangible asset, with a determinable useful life, and an
intangible asset with an indefi nite life. Purchase price consideration
of $0.2million was allocated to customer relationships, an
intangible asset with a determinable useful life of two years,
over which the cost will be amortized. Purchase costs allocated
to intangible assets with indefi nite lives were $0.2million, and
relate to a trade name. e intangible assets recognized in this
transaction were assigned to the Securities segment. Negative
goodwill of $0.4million was recognized as a gain on bargain
purchase in the consolidated income statement as a result of the
identifi cation of intangible assets upon completion of purchase
accounting during the fi rst quarter of 2011. e Company’s
consolidated fi nancial statements include the operating results
of Provident from the date of acquisition.
Acquisitions in 2009
CIBSA
In April2009, the Company acquired Compania Inversora
Bursatil S.A. Sociedad de Bolsa (“CIBSA”), now renamed
INTL CIBSA Sociedad de Bolsa S.A.). CIBSA is a leading
securities broker-dealer based in Argentina. e purchase price
for the acquisition of CIBSA consisted of an initial payment of