Western Union 2011 Annual Report Download - page 111

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
years. For the remaining assets and liabilities excluding goodwill and deferred tax liabilities, fair value
approximated carrying value.
The goodwill recognized for TGBP of $728.7 million is attributable to expected synergies, the projected long-
term business growth in current and new markets and an assembled workforce and relates entirely to the global
business payments segment. The goodwill recognized for Finint and Costa of $153.1 million and $172.3 million,
respectively, is attributable to growth opportunities that will arise from the Company directly managing its agent
relationships, expected synergies, projected long-term business growth and an assembled workforce and relates
entirely to the consumer-to-consumer segment. Based on the preliminary allocation of purchase price, goodwill
expected to be deductible for income tax purposes for TGBP, Finint and Costa is approximately $470.6 million,
$97.0 million and $104.9 million, respectively.
Other acquisitions
On September 1, 2009, the Company acquired Canada-based Custom House, a provider of international
business-to-business payment services, for $371.0 million. The acquisition of Custom House allowed the
Company to enter the international business-to-business payments market. Custom House facilitates cross-
border, cross-currency payment transactions. These payment transactions are conducted through various channels
including the phone and Internet. The significant majority of Custom House’s revenue is from exchanges of
currency at the spot rate enabling customers to make cross-currency payments. In addition, this business writes
foreign currency forward and option contracts for its customers to facilitate future payments. The duration of
these derivatives contracts is generally nine months or less. The results of operations for Custom House have
been included in the Company’s consolidated financial statements from the date of acquisition.
The Company recorded the assets and liabilities of Custom House at fair value, excluding the deferred tax
liability. 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. 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.
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.
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