Telus 2011 Annual Report Download - page 152

148 . TELUS 2011 ANNUAL REPORT
The Company’s investment in Transactel (Barbados) Inc. is summarized as follows:
Interest in Transactel (Barbados) Inc. attributable to:
Common Shares
and Non-Voting Shares Non-controlling interest(2) To ta l
Economic Economic Economic
($ in millions) interest interest interest
December 2008 tranche
Cash $ß 19
Contingent consideration 10
29 29.99%
January 2011 tranche 20 21.01%
Equity accounting adjustments through
February 1, 2011 (2)
47 51.00%
Gain on 51% interest re-measured
at acquisition-date fair value 16
Relative acquisition-date (February 1, 2011)
fair values 63 51.00% $ß60 49.00% $ß123 100.00%
May 2011 equity transaction(1) 56 44.00% (56) (44.00%) – –
$ß119 95.00% $ß 4 5.00% $ß123 100.00%
(1) The difference between the amount paid by the Company for the incremental 44% economic interest and the associated proportionate share of the non-controlling interest in the
net assets of Transactel (Barbados) Inc. was recorded as a credit to retained earnings in the Consolidated Statements of Changes in Owners’ Equity.
(2) The non-controlling interest at December 31, 2011, is included in the Consolidated Statements of Financial Position as a non-current provision due to the provision of a written put
option for the 5% economic interest not owned by the Company.
The acquisition was effected as follows:
.On December 22, 2008, the Company acquired an initial 29.99%
economic interest in Transactel (Barbados) Inc. for $19 million
cash. Additional contingent consideration could become payable
depending upon Transactel (Barbados) Inc. earnings for the year
ended December 31, 2011.
Concurrent with acquiring the initial interest in Transactel
(Barbados) Inc., the Company provided two written put options
to the vendor. The first written put option became exercisable
on December 31, 2009, expiring June 30, 2011, and allowed the
vendor to put up to a further 21.01% economic interest to the
Company (the Company’s effective economic interest in Transactel
(Barbados) Inc. would become 51% assuming the written put
option was exercised in full). The second written put option became
exercisable on December 31, 2010, it had no expiry, and it allowed
the vendor to put whatever interest was not put under the first
written put option plus up to an incremental 44% economic interest
to the Company. The written put options set out the share pricing
methodology, which was dependent upon Transactel (Barbados) Inc.
future earnings.
The vendor provided the Company with two purchased call
options which substantially mirrored the written put options except
that they were only exercisable upon Transactel (Barbados) Inc.
achieving certain business growth targets.
The Company initially accounted for its investment in Transactel
(Barbados) Inc. using the equity method.
.On January 7, 2011, the Company exercised its first purchased call
option to acquire an additional 21.01% economic interest in Transactel
(Barbados) Inc. from the vendor for $20 million cash.
Upon such exercise, the Company continued to account for
its resulting direct 51% economic interest in Transactel (Barbados)
Inc. using the equity method. Transactel (Barbados) Inc.’s board
of directors “super-majority” provisions affected the Company’s
assessment of control as the continuing power to determine the
strategic operating, investing and financing policies of Transactel
(Barbados) Inc. resided with the board of directors “super-majority”.
Although the Company had the right to elect a simple majority of
the board of directors at the direct 51% economic interest level, the
vendor’s remaining direct 49% economic interest effectively had a
veto right over the strategic operating, investing and financing policies
of Transactel (Barbados) Inc. and thus the Company did not have
the control necessary to apply consolidation accounting.
(e) Business acquisitions
Transactel (Barbados) Inc.
During the three-month period ended March 31, 2011, the Company
acquired control of Transactel (Barbados) Inc., a business process out-
sourcing and call centre company with facilities in two Central American
countries. The investment was made with a view to enhancing the
Company’s business process outsourcing capacity, particularly regarding
Spanish-language capabilities, and acquiring multi-site redundancy in sup-
port of other facilities. The primary factor that contributed to the recognition
of goodwill was the earnings capacity of the acquiree in excess of the net
tangible assets and net intangible assets acquired (such excess arising from:
the assembled workforce; the established operation with certain capabilities
in the industry; and the geographic location of the acquiree). The amount
assigned to goodwill is not expected to be deductible for tax purposes.