INTL FCStone 2011 Annual Report Download - page 20

INTL FCSTONE INC.Form10K6
PARTI
ITEM 1 Business
Acquisition of FCStone Group, Inc.
On September30,2009, the Company completed its acquisition
of FCStone Group,Inc. (“FCStone”) pursuant to the merger of
FCStone and a wholly owned subsidiary of the Company (the
“FCStone transaction”). As a result of this transaction, the Company
issued approximately 8.2million shares of its common stock to the
former stockholders of FCStone, and FCStone became a wholly
owned subsidiary of INTLFCStoneInc.
At the time of the acquisition, FCStone and its subsidiaries provided
risk management advisory and transaction execution services to
commercial commodity intermediaries, users and producers. FCStone
primarily assisted middle-market customers in optimizing their pro t
margins and mitigating commodity price risk. In addition to its risk
management advisory services, FCStone operated an independent
clearing and execution platform for exchange-traded commodity
futures and options on futures contracts. All of the capabilities of
FCStone have been retained and integrated into our operations.
Eff ect of FCStone transaction on disclosures in this Form 10-K
 e FCStone transaction was consummated on September30,2009,
the last day of the 2009 fi scal year for the Company. As a result, the
consolidated income statements of the Company for the fi scal years
ended September30,2011 and 2010 include the results of FCStone,
while the consolidated income statement of the Company for the
fi scal year ended September30,2009, included in this Form10-K,
does not include the results of FCStone.  e consolidated balance
sheets for the Company as of September30,2011 and 2010 included
in this Form10-K refl ect the acquisition of FCStone utilizing the
purchase method of accounting.
Acquisitions made in the 2011 Fiscal Year
During fi scal year2011, the Company acquired two businesses,
Hencorp Becstone Futures,L.C. and Ambrian Commodities
Limited, and certain assets from Hudson Capital Energy,LLC,
which were not considered signifi cant on an individual or aggregate
basis.  e Company’s consolidated fi nancial statements include
the operating results of the two businesses and certain purchased
assets from the related dates of acquisition.
Hencorp Futures
In October,2010, we acquired Hencorp Becstone Futures,
L.C., the futures operation of Miami-based Hencorp Group,
which was renamed INTL Hencorp Futures,LLC (“Hencorp
Futures”). Hencorp Futures specializes in the development and
execution of risk-management programs designed to hedge price
volatility in a number of widely traded commodities, including
coff ee, sugar, cocoa, grains and energy products.  e transaction
will enable us to round out our portfolio of commodity risk
management services to include a more robust capability in
soft commodities, especially coff ee, where Hencorp Futures
has established a substantial presence and reputation globally,
and especially in Central and South America.  e purchase
price consisted of an initial payment of $2.3million, payments
totaling $1.4million, representing the adjusted tangible equity of
Hencorp Futures as of September30,2010, four annual contingent
payments based on adjusted pre-tax earnings, as defi ned in the
purchase agreement, and a fi nal contingent payment based on
the average of the second, third and fourth years payments.  e
present value of the estimated total purchase price, including
contingent consideration, is $6.4million as of September30,2011.
Certain Assets Purchased from Hudson
Capital Energy, LLC
In April,2011, we entered into an agreement with Hudson
Capital EnergyLLC (“HCEnergy”), a NewYork-based energy
risk-management fi rm, to acquire certain assets from HCEnergy.
 e transaction enables the Company’s energy risk management
services to include a more robust capability in crude oil and
refi ned products.  e purchase price consisted of the aggregate
net asset value of certain commodity futures brokerage accounts
and certain proprietary software, totaling $1.0million.
Ambrian Commodities Limited
In April,2011, we agreed to acquire the issued share capital
of Ambrian Commodities Limited (“Ambrian”), the London
Metals Exchange brokerage subsidiary of Ambrian CapitalPlc.
On August5,2011, the Financial Services Authority granted its
approval of the change of control of Ambrian.  e transaction
was eff ective on August31,2011, and subsequently Ambrian
was renamed INTL FCStone (Europe)Ltd. (“INTL FCStone
(Europe)”). Ambrian, a non-clearing LME member, specializes
in the development and execution of risk-management programs
designed to hedge price fl uctuations in base metals for a wide
variety of producers, manufacturers and fabricators. Ambrian has
a niche focus on smaller industrial clients, including lead recyclers,
brass producers, zinc galvanizers, metal refi neries and copper foil
producers that use LME futures and options for hedging raw
material costs or output prices. At closing, the Company paid
$7.1million, representing the net asset value of Ambrian less
certain intercompany balances due to Ambrian from its affi liates.