Twenty-First Century Fox 2007 Annual Report Download - page 79

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
The Company is currently evaluating what effects the adoption of SFAS No. 159 will have on the Company’s future results of oper-
ations and financial condition.
Note 3 Acquisitions, Disposals and Other Transactions
Fiscal 2007 Transactions
Acquisitions
In November 2006, the Company, together with a local Turkish partner, acquired TGRT (now called “FOX TV”), a national general
interest free-to-air broadcast television station in Turkey. The Company acquired its interest for approximately $103 million in cash
plus acquisition related costs.
In December 2006, NDS, an indirect majority-owned subsidiary of the Company, acquired Jungo Limited (“Jungo”), a devel-
oper and supplier of software for residential gateway devices, for approximately $91 million. Additional consideration of up to $17
million may be payable in cash, contingent upon Jungo achieving certain revenue and profitability targets in the year ending
December 31, 2007.
In January 2007, the Company and VeriSign, Inc. (“VeriSign”) formed a joint venture to provide entertainment content for
mobile devices. The Company paid approximately $190 million for a controlling interest in VeriSign’s wholly-owned subsidiary,
Jamba, which was combined with certain of the Company’s Fox Mobile Entertainment assets. The results of the joint venture have
been included in the Company’s consolidated results of operations since January 2007. The Company and VeriSign have various call
and put rights related to VeriSign’s ownership interest, including VeriSign’s right to put its interest in the joint venture to the Com-
pany for $150 million and $350 million, in fiscal 2010 and fiscal 2012, respectively.
In March 2007, the Company acquired Strategic Data Corporation (“SDC”), a developer of technology that allows websites to
target advertisements to specific audiences. The Company acquired SDC for a total purchase price of $50 million, of which $40 mil-
lion was in cash and $10 million in deferred consideration. The Company may be required to pay up to an additional $310 million
through fiscal 2010 contingent upon SDC achieving specified advertising rate growth in future periods.
In April 2007, the Company completed its acquisition of Federal Publishing Company’s (“FPC”) magazines, newspapers and
online properties in Australia from F Hannan Pty Limited for approximately $393 million.
In accordance with SFAS No. 142, the excess purchase price that has been allocated or has been preliminarily allocated to
goodwill is not being amortized for all of the acquisitions noted above. Where the allocation of the excess purchase price is not final,
the amount allocated to goodwill is subject to changes upon completion of final valuations of certain assets and liabilities. A future
reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets could reduce
future earnings as a result of additional amortization. For every $10 million reduction in goodwill for additional value to be assigned
to identifiable finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approx-
imately $1 million per fiscal year, representing amortization expense assuming an average useful life of ten years.
The aforementioned acquisitions were all accounted for in accordance with SFAS No. 141, “Business Combinations” (“SFAS
141”).
Share Exchange Agreement
On December 22, 2006, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Liberty
Media Corporation (“Liberty”). Under the terms of the Share Exchange Agreement, Liberty will exchange its entire interest in the
Company’s common stock (approximately 325 million shares of Class A Common Stock and 188 million shares of Class B Common
Stock) for 100% of a News Corporation subsidiary (“Splitco”), whose holdings will consist of an approximately 39% interest
(approximately 470 million shares) in The DIRECTV Group, Inc. (“DIRECTV”) constituting the Company’s entire interest in DIRECTV,
three of the Company’s Regional Sports Networks (FSN Northwest, FSN Pittsburgh and FSN Rocky Mountain (the “Three RSNs”))
and $588 million in cash, subject to adjustment. The transaction contemplated by the Share Exchange Agreement was approved by
the Company’s Class B stockholders on April 3, 2007 but remains subject to customary closing conditions, including, among other
things, regulatory approvals, the receipt of a ruling from the Internal Revenue Service and the absence of a material adverse effect
on Splitco. If these conditions are satisfied, the transaction is expected to be completed in the fourth quarter of calendar 2007. The
Company will enter into a non-competition agreement with DIRECTV and non-competition agreements with each of the Three
RSNs, in each case, restricting its right to compete for a period of four years with DIRECTV and the Three RSNs in the respective
regions in which such entities are operating on the date the Share Exchange Agreement is consummated.
Other Transactions
In August 2006, the Company announced that its FIM division entered into a multi-year search technology and services agreement
with Google, Inc. (“Google”), pursuant to which Google is the exclusive search and keyword-targeted advertising sales provider for
a majority of FIM’s web properties. Under the terms of the agreement, Google is obligated to make guaranteed minimum revenue
share payments to FIM of $900 million, of which the $50 million that was due was paid as of June 30, 2007. These guaranteed
minimum revenue share payments, which are based on FIM’s achievement of certain traffic and other commitments, are expected
to be made through the second quarter of calendar 2010.
The Company previously entered into an agreement with a direct response marketing company that provided the Company
with participation rights if the direct response marketing company is ever sold or consummates certain other strategic transactions.
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