Twenty-First Century Fox 2006 Annual Report Download - page 84

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
Pro forma data maynotbe indicative of the results that would have been obtained had these events actually occurred at
the beginning of the periods presented, nor does it intend to be a projection of future results.
Other fiscal 2005 transactions
In September 2004, the Company purchased Telecom Italia S.p.A.’s (“Telecom Italia”) 20% interest in SKY Italia for cash
consideration of $108 million, thereby increasing the Company’s ownership interest in SKY Italia to 100%.
In April 2005, the Company and Rainbow Media Holdings (“Rainbow”) exchanged their investments in Regional Pro-
gramming Partners (“RPP”). Under the terms of the agreement, the Company exchanged its 40% interest in RPP for Rain-
bow’s 60% interests in Fox Sports Net Ohio and Fox Sports Net Florida (formerly included in the RPP business) and
Rainbow’s 50% interests in National Sports Partners and National Advertising Partners increasing the Company’s ownership
in these entities to 100%. In addition, the Company retained its 40% interest in SportsChannel Pacific Associates
(“SportsChannel Bay Area”) (also formerly included in the RPP business) and remitted to RPP the $150 million in promis-
sory notes it received from RPP as a result of RPP’s December 2003 acquisition of the Company’s direct ownership interests
in SportsChannel Chicago Associates (“SportsChannel Chicago”) and SportsChannel Bay Area. The Company accounted for
this exchange in accordance with APB Opinion No. 29, “Accounting for Nonmonetary Transactions” and accordingly the
Company recorded the assets received at fair value upon closing. The Company has recognized a loss of approximately $85
million on this restructuring in Other, net in the accompanying consolidated statement of operations.
Fiscal Year 2004 Transactions
In December 2003, NDS Group plc (“NDS”), an indirect majorityowned subsidiary of the Company, which is publicly trad-
ed, acquired 100% of the MediaHighway middleware business from asubsidiary of Thomson SA and licensed certain related
patents from Thomson SA for a total consideration of $73 million in cash. Subsequent to this acquisition, the Company
concluded that certain intangible assets recognized on acquisition were not supported by projections of the incremental
future cash flows attributable to the acquired business. Accordingly, the Company has recorded an impairmentcharge
against these intangibles of $11.3 million reflected in Operating expenses within Operatingincome.
In April 2003, the Company and Telecom Italia acquired Telepiu, S.p.A. (“Telepiu”), Vivendi Universal’s satellite
pay-television platform in Italy for approximately $874 million, consisting of the assumption of $388 million in out-
standing indebtedness and a cash payment of $486 million. In the acquisition, Telepiu was merged with Stream S.p.A.
(“Stream”), and the combinedplatform was renamed SKY Italia, which was then owned 80% by the Company and 20% by
Telecom Italia. In December 2003, SKY Italia sold two wholly owned subsidiaries, Prima S.p.A. and Europa S.p.A., for total
consideration of $112 million. The Company ascribed afair value of $112 million to these assets in connection with the
Telepiu acquisition that occurred in April 2003 and accordingly, no gain or loss was recognized on the sale.
In December 2003, the Company sold its 50% direct ownership interests in SportsChannel Chicago and SportsChannel
Bay Area (collectively the “SportsChannels”) to subsidiaries of RPP for consideration of $150 million. This consideration
was paid wholly in the form of two three-year promissory notes issued by the subsidiariesofRPP, which own only the
acquired interests in the SportsChannels, in an aggregate amount of $150 million and bearing interest at prime plus 1% per
annum. The notes are secured by apledge of 100% of the interests in SportsChannel Bay Area. Upon the close of this sale,
the SportsChannels were held 100% by RPP and indirectly 60% by Rainbow Media Sports Holdings, Inc. and 40% by the
Company. The Company recognized anetgain on the sale of the SportsChannels of $9 million, which is reflected in Other,
net in the accompanying consolidated statements of operations.
In February 2004, the Company sold the Los Angeles Dodgers (“Dodgers”), together with Dodger Stadium and the
team’s training facilities in Vero Beach, Florida and the Dominican Republic, to entities owned by Frank McCourt (the
“McCourt Entities”). The gross consideration for the sale of the Dodgers franchiseandreal estate assets was $421 million,
subject tofurther adjustment. The consideration at closing was comprised of (i) $225 million in cash, (ii) a$125 million 2
year note, (iii) a$40 million four-year note secured by bank letters of credit and (iv) a$31million three-year note that is
convertible, at the Company’s option, into preferred equity in the McCourt Entities. The Company had agreed to remit $50
million duringthefirst two years following the closing of the transaction to reimburse the McCourt Entities for certain
pre-existing commitments which has been paid. The Company recognized anetloss of $2 million on the disposition of the
Dodgers. As of June 30, 2005, the McCourt Entities had paid off all of the notes except for $125 million note secured by real
estate. This real estate consists of approximately 23 acres located in the Seaport District of Boston, Massachusetts. In March
2006, the McCourt Entities remitted the real estate to the Company in full satisfaction of the note,including accrued inter-
est of $20 million. In conjunction with this transfer, the Company assumed $36 million in debt. The Company recorded
the assets and liabilities received at fair value upon closing. No gain or loss was recognized as the net fair value of the land
approximated the value of the note.
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