JP Morgan Chase 2006 Annual Report Download - page 98

96 JPMorgan Chase & Co. / 2006 Annual Report
The final purchase price of the Merger was allocated to the assets acquired
and liabilities assumed using their fair values as of the Merger date. The com-
putation of the purchase price and the allocation of the purchase price to the
net assets of Bank One – based upon their respective fair values as of July 1,
2004 – and the resulting goodwill are presented below.
(in millions, except per share amounts) July 1, 2004
Purchase price
Bank One common stock exchanged 1,113
Exchange ratio 1.32
JPMorgan Chase common stock issued 1,469
Average purchase price per
JPMorgan Chase common share(a) $ 39.02
$ 57,336
Fair value of employee stock awards and
direct acquisition costs 1,210
Total purchase price 58,546
Net assets acquired:
Bank One stockholders’ equity $ 24,156
Bank One goodwill and other intangible assets (2,754)
Subtotal 21,402
Adjustments to reflect assets
acquired at fair value:
Loans and leases (2,261)
Private equity investments (72)
Identified intangible assets 8,665
Pension plan assets (778)
Premises and equipment (417)
Other assets (267)
Amounts to reflect liabilities
assumed at fair value:
Deposits (373)
Deferred income taxes 932
Other postretirement benefit plan liabilities (49)
Other liabilities (1,162)
Long-term debt (1,234)
24,386
Goodwill resulting from Merger(b) $ 34,160
(a) The value of the Firm’s common stock exchanged with Bank One shareholders was based
upon the average closing prices of the Firm’s common stock for the two days prior to, and
the two days following, the announcement of the Merger on January 14, 2004.
(b) Goodwill resulting from the Merger reflects adjustments of the allocation of the purchase
price to the net assets acquired through June 30, 2005.
Condensed statement of net assets acquired
The following condensed statement of net assets acquired reflects the fair
value of Bank One net assets as of July 1, 2004.
(in millions) July 1, 2004
Assets
Cash and cash equivalents $ 14,669
Securities 70,512
Interests in purchased receivables 30,184
Loans, net of allowance for loan losses 129,650
Goodwill and other intangible assets 42,825
All other assets 47,739
Total assets $ 335,579
Liabilities
Deposits $ 164,848
Short-term borrowings 9,811
All other liabilities 61,494
Long-term debt 40,880
Total liabilities 277,033
Net assets acquired $ 58,546
Acquired, identified intangible assets
Components of the fair value of acquired, identified intangible assets as of
July 1, 2004, were as follows:
Fair value Weighted-average Useful life
(in millions) life (in years) (in years)
Core deposit intangibles $ 3,650 5.1 Up to 10
Purchased credit card relationships 3,340 4.6 Up to 10
Other credit card–related intangibles 295 4.6 Up to 10
Other customer relationship intangibles 870 4.6–10.5 Up to 20
Subtotal 8,155 5.1 Up to 20
Indefinite-lived asset management
intangibles 510 NA NA
Total $ 8,665
Unaudited pro forma condensed combined financial information
The following unaudited pro forma condensed combined financial information
presents the results of operations of the Firm had the Merger taken place at
January 1, 2004.
Year ended December 31, (in millions, except per share data) 2004
Noninterest revenue $ 30,684
Net interest income 21,132
Total net revenue 51,816
Provision for credit losses 2,727
Noninterest expense 40,117
Income from continuing operations
before income tax expense 8,972
Income from continuing operations 6,338
Income from discontinued operations 206
Net income $ 6,544
Net income per common share:
Basic
Income from continuing operations $ 1.79
Net income 1.85
Diluted
Income from continuing operations 1.75
Net income 1.81
Average common shares outstanding:
Basic 3,510
Diluted 3,593
Other business events
Acquisition of the consumer, business banking and middle-market
banking businesses of The Bank of New York in exchange for
selected corporate trust businesses, including trustee, paying
agent, loan agency and document management services
On October 1, 2006, JPMorgan Chase completed the acquisition of The Bank
of New York Company, Inc.’s (“The Bank of New York”) consumer, business
banking and middle-market banking businesses in exchange for selected cor-
porate trust businesses plus a cash payment of $150 million. This acquisition
added 339 branches and more than 400 ATMs, and it significantly strength-
ens Retail Financial Services distribution network in the New York Tri-state
area. The Bank of New York businesses acquired were valued at a premium of
$2.3 billion; the Firm’s corporate trust businesses that were transferred (i.e.,
trustee, paying agent, loan agency and document management services) were
valued at a premium of $2.2 billion. The Firm also may make a future pay-
ment to The Bank of New York of up to $50 million depending on certain
new account openings. This transaction included the acquisition of approxi-
mately $7.7 billion in loans net of Allowance for loan losses and $12.9 billion
in deposits from The Bank of New York. The Firm also recognized core deposit
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JPMorgan Chase & Co.