INTL FCStone 2011 Annual Report Download - page 109

INTL FCSTONE INC.Form10K 95
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
$1.7million on the date of purchase and an additional contingent
payment of $0.8million in May2010, based on the level of
revenues achieved.  e net revenues for the twelve-month period
ended March31,2011 were below the minimum target, so no
further amounts were paid.  e Company has recorded goodwill
of $1.5million during the previous fi scal years as a result of
completing its purchase accounting for this transaction, including
the additional contingent consideration paid.  e Company’s
consolidated fi nancial statements include the operating results
of CIBSA from the date of acquisition.
FCStone Group, Inc.
On September30,2009, the Company acquired FCStone
Group,Inc. (“FCStone”) through the issuance of 8,239,319shares
of the Company’s common stock. As a result of the acquisition,
FCStone became a wholly-owned subsidiary of the Company.
FCStone is an integrated risk management company that provides
risk management consulting and transaction execution services to
commercial commodity intermediaries, end-users and producers.
 e Company believes that the acquisition will create a leading
global provider of consulting and trade execution services.
Management believes the combined entity will be better positioned
to take advantage of market opportunities and enjoy better access
to capital sources. In addition to those factors, other primary
factors for the acquisition includes revenue diversifi cation,
additional product off erings, creation of critical mass, enhanced
geographic footprint, expanded stockholder base and liquidity
in the stock and an experienced management team.
Since the acquisition was completed on September30,2009,
which is the last day of the Company’s fi scal year end, no
results of operations from FCStone have been included in the
Company’s consolidated income statement for the year ended
September30,2009.
 e purchase price of approximately $137.6million includes the fair value of common stock issued and related acquisition costs.
 e components of the purchase price are as follows:
(in millions, except shares and per share amounts September30,2009
Number ofshares of INTLFCStoneInc. common stock issued 8,239,319
Weighted average price per share of INTLFCStoneInc. common stock,
for the period covering two days immediately before and after September30,2009 $ 16.45
Consideration attributable to issuance of INTLFCStoneInc. common stock $ 135.5
INTLFCStoneInc. acquisition costs 2.1
TOTAL PURCHASE PRICE $ 137.6
In connection with the merger, the holders of FCStone common
stock and stock options became holders of the Company’s common
stock and stock options, respectively. As a result of the acquisition,
all unvested FCStone stock options became fully vested as of
the eff ective date of the acquisition. Each outstanding share of
common stock of FCStone was converted into 0.295shares
(the “exchange ratio”) of the Company’s common stock. In
addition, each outstanding vested FCStone stock option granted
under FCStone’s stock option plan was converted into a vested
option to purchaseshares of the Company’s common stock,
with adjustments to the number ofshares and the strike price
to refl ect the exchange ratio.
 e fair value of the common stock issued was determined using
a value of $16.45 per share, which represents the average closing
price of the Company’s common stock for the fi ve-day period
comprised of the two days prior to, and the two days subsequent
to the date of the acquisition on September30,2009.
 e total purchase price of the assets acquired and liabilities
assumed for the acquisition of FCStone is allocated to the net
tangible and intangible assets based on their estimated fair value
as of the date of the acquisition. Management’s estimates of fair
value are based upon assumptions believed to be reasonable, but
which are inherently uncertain and unpredictable. Applying
purchase accounting resulted in the mark-up of FCStone’s
exchange memberships and stock to fair value, resulting in an
increase of $2.6million to exchange memberships and stock,
net of estimated deferred income taxes of $1.8million, the
recording of an actuarial loss of $0.5million on the FCStone
defi ned-benefi t pension plan and a decrease to the recorded
Agora-X minority interest balance of $4.4million.
 e allocation of the purchase price to assets acquired and
liabilities assumed as of the date of acquisition resulted in negative
goodwill. In accordance with Statement of Financial Accounting
Standard No. 141, Business Combinations, the negative goodwill
was allocated as a pro rata deduction of the amounts assigned to
the assets acquired excluding fi nancial assets, deferred taxes and
other current assets.  is resulted in the allocation of negative
goodwill to the writing down of $4.2million in non-current assets,
net of estimated deferred taxes of $2.9million.  e remaining
negative goodwill of $18.5million has been recognized as an
extraordinary item in the consolidated income statement for the
year ended September30,2009.