Western Union 2010 Annual Report Download - page 95

The Company recorded the assets and liabilities of Custom House at fair value, excluding the deferred tax
liability. The following table summarizes the final allocation of purchase price, which differs only slightly from the
preliminary allocation primarily due to an $8.3 million adjustment related to tax, which resulted in reductions to the
deferred tax liability and goodwill (in millions):
Assets:
Cash acquired............................................................................................................................. $ 2.5
Settlement assets ........................................................................................................................ 153.6
Property and equipment .............................................................................................................. 6.7
Goodwill .................................................................................................................................... 264.3
Other intangible assets ................................................................................................................ 118.1
Other assets................................................................................................................................ 77.6
Total assets................................................................................................................................. $ 622.8
Liabilities:
Accounts payable and accrued liabilities ...................................................................................... $ 23.3
Settlement obligations ................................................................................................................. 153.6
Deferred tax liability, net............................................................................................................. 23.6
Other liabilities........................................................................................................................... 51.3
Total liabilities ........................................................................................................................... 251.8
Total consideration, including cash acquired ................................................................................. $ 371.0
The valuation of assets acquired resulted in $118.1 million of identifiable intangible assets, $99.8 million of
which were attributable to customer and other contractual relationships and were valued using an income approach
and $18.3 million of other intangibles, which were valued using both income and cost approaches. These fair values
were derived using primarily unobservable Level 3 inputs which require significant management judgment and
estimation. For the remaining assets and liabilities, excluding goodwill, fair value approximated carrying value. The
intangible assets related to customer and other contractual relationships are being amortized over 10 to 12 years.
The remaining intangibles are being amortized over three to five years. The goodwill recognized of $264.3 million
is attributable to the projected long-term business growth in current and new markets and an assembled workforce.
All goodwill relates entirely to the global business payments segment. Goodwill expected to be deductible for
United States income tax purposes is approximately $231.3 million.
Other acquisitions
On February 24, 2009, the Company acquired the money transfer business of European-based FEXCO, one of
the Company’s largest agents providing services in a number of European countries, primarily the United Kingdom,
Spain, Sweden and Ireland. The acquisition of FEXCO’s money transfer business has assisted the Company in the
implementation of the Payment Services Directive (“PSD”) in the European Union by providing an initial operating
infrastructure. The PSD has allowed the Company to operate under a single license in 27 European countries and, in
those European Union countries where the Company has been limited to working with banks, post-banks and
foreign exchange houses, to expand its network to additional types of businesses. The acquisition does not impact
the Company’s revenue, because the Company was already recording all of the revenue arising from money
transfers originating at FEXCO’s locations. As of the acquisition date, the Company no longer incurs commission
costs for transactions related to FEXCO; rather, the Company now pays commissions directly to former FEXCO
subagents, resulting in lower overall commission expense. The Company’s operating expenses include costs
attributable to FEXCO’s operations subsequent to the acquisition date.
Prior to the acquisition, the Company held a 24.65% interest in FEXCO Group Holdings (“FEXCO Group”),
which was a holding company for both the money transfer business as well as various unrelated businesses. The
Company surrendered its 24.65% interest in FEXCO Group as non-cash consideration, which had an estimated fair
93