Twenty-First Century Fox 2013 Annual Report Download - page 115

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Yankees Entertainment and Sports Network
In December 2012, the Company acquired a 49% equity interest in the Yankees Entertainment and Sports
Network (“YES Network”), a RSN, for approximately $584 million and simultaneous with the closing of this
transaction, the Company paid approximately $250 million of upfront costs on behalf of YES Network. The
Company’s investment of approximately $834 million is being allocated between tangible and intangible assets
in accordance with ASC 323, “Investments—Equity Investments.” The allocation of the excess cost is not final
and is subject to change upon completion of final valuations of certain assets and liabilities. Changes in how the
Company allocates excess cost could reduce future equity earnings as a result of additional amortization. Starting
in December 2015, the remaining partners can exercise a put option that would require the Company to acquire
up to an additional 31% interest. If the put option is not exercised, the Company has a call option beginning in
December 2016 that would allow the Company to acquire up to an additional 31% interest. The carrying value of
the put and call options approximate fair value.
NDS
In July 2012, the Company sold its 49% investment in NDS to Cisco Systems Inc. for approximately $1.9
billion, of which approximately $60 million has been set aside in escrow to satisfy any indemnification
obligations. The Company recorded a gain of approximately $1.4 billion on this transaction which was included
in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2013.
Sky Deutschland
During the third quarter of fiscal 2013, the Company acquired, through a combination of a private
placement and a rights offering, approximately 92 million additional shares of Sky Deutschland increasing its
ownership to approximately 55%. The aggregate cost of the shares acquired by the Company was approximately
€410 million (approximately $550 million). As a result of these transactions, the Company has the power to
control Sky Deutschland and the results of Sky Deutschland are included in the Company’s consolidated results
of operations beginning in January 2013. Prior to the acquisition of the additional shares, the Company accounted
for its investment in Sky Deutschland under the equity method of accounting and the Company’s investment
consisted of common stock, convertible bonds and loans.
In addition, the Company has guaranteed Sky Deutschland’s new €300 million (approximately $400
million) five-year bank credit facility, of which approximately €225 million (approximately $290 million) has
been utilized and is included in borrowings. In connection with the consolidation of Sky Deutschland, the
Company assumed $480 million in bank debt, which Sky Deutschland repaid in full during the third quarter of
fiscal 2013. Additionally, the Company is the guarantor to the German Football League for Sky Deutschland’s
Bundesliga broadcasting license for the 2013/14 to 2016/17 seasons in an amount up to 50% of the license fee
per season and the Company has also agreed to extend the maturity of existing shareholder loans that were issued
before it became a consolidated subsidiary.
In January 2011, the Company purchased a convertible bond from Sky Deutschland for approximately $225
million. The Company currently has the right to convert the bonds into 53.9 million underlying Sky Deutschland
shares, subject to certain black-out periods. If not converted, the Company will have the option to redeem the
bonds for cash upon their maturity in January 2015. The convertible bonds were separated into their host and
derivative financial instrument components. Prior to Sky Deutschland becoming a consolidated subsidiary, both
the host and derivative financial instrument components were recorded at their estimated fair value in
Investments in the consolidated balance sheets. The change in estimated fair value of the derivative instrument
resulted in a gain of approximately $58 million and a loss of approximately $61 million and were recorded in
107