Virgin Media 2006 Annual Report Download - page 100

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Acquisitions (Continued)
Amortizable intangible assets
Of the total purchase price, £295.3 million has been allocated to amortizable intangible assets including customer lists and
contractual relationships. Customer lists represent existing contracts that relate primarily to underlying customer relationships
pertaining to the services provided by Virgin Mobile. The fair value of these assets was determined utilizing the income approach. We
expect to amortize the fair value of these assets on a straight−line basis over weighted average estimated useful lives of four years.
Contractual relationships represent the fair value of certain contracts with distributors of our products and services. The fair value
of these contracts was determined utilizing the income approach. We expect to amortize the fair value of these assets on a straight−line
basis over the remaining life of the contracts of three years.
Reverse Acquisition of Telewest
On March 3, 2006, NTL Holdings Inc. (formerly known as NTL Incorporated) merged with a subsidiary of NTL Incorporated
(formerly known as Telewest Global, Inc.) and the merger has been accounted for as a reverse acquisition of Telewest using the
purchase method. This merger created the U.K.’s largest provider of residential broadband and the U.K.’s leading provider of
“triple−play” services. In connection with this transaction, Telewest changed its name to NTL Incorporated, and has since changed its
name to Virgin Media Inc.
The total purchase price of £3.5 billion includes cash of £2.3 billion, common stock valued at £1.1 billion, stock options with a
fair value of £29.8 million and estimated direct transaction costs of £25.1 million. The average market price per share of common
stock utilized in determining the value of the new common stock issued of £13.00 ($22.90) is based on an average of the closing
prices of Telewest common stock for a range of trading days (September 29, September 30, October 3, October 4 and October 5,
2005) around the announcement date of the proposed merger (October 3, 2005). The cash payment of £2.3 billion was based on the
redemption value of $16.25 (£9.30) per share of Telewest redeemable common stock issued in exchange for Telewest common stock
in the transaction and 246.0 million shares of Telewest redeemable common stock so issued.
The outstanding options to purchase shares of Virgin Media Holdings common stock were exchanged for options to purchase
shares of Virgin Media Inc. new common stock with the same terms and conditions.
The outstanding options to purchase shares of Telewest common stock were converted into options to purchase shares of Virgin
Media Inc. new common stock at an option price calculated in accordance with the formula in the merger agreement. In accordance
with the terms of Telewest’s equity−based plans, a significant proportion of Telewest’s outstanding options that were granted prior to
March 3, 2006 vested upon completion of the merger. All vested and unvested options of Telewest have been recorded at their fair
value by using the Black−Scholes option pricing model.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007