Activision 2008 Annual Report Download - page 70

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56
The purchase price of Activision, Inc. consists of the following items (amounts in
millions):
Fair market value of Activision, Inc.’s outstanding common
stock immediately prior to the Business Combination at the
closing price...........................................................................
.
$9,057
Fair value of Activision, Inc.’s existing vested and unvested
stock awards at the closing price*..........................................
.
861
Transaction expenses.................................................................
.
1
Total consideration.................................................................
.
$9,919
* The fair value of the existing vested and unvested stock award is
comprised of the following (amounts in millions):
Fair value of Activision, Inc. existing vested stock awards............. $713
Fair value of Activision, Inc. unvested stock awards....................... 296
Less: Unearned stock-based compensation...................................... (148)
$861
The fair value of Activision, Inc.’s stock awards was determined using the fair value of
Activision, Inc.’s common stock of $15.04 per share, which was the closing price at July 9, 2008,
and using a binomial-lattice model and the following assumptions: (a) varying volatility ranging
from 42.38% to 51.50%, (b) a risk free interest rate of 3.97%, (c) an expected life ranging from
3.22 years to 4.71 years, (d) risk adjusted stock return of 8.89%, and (e) an expected dividend
yield of 0.0%.The Company’s allocation of the purchase price of Activision, Inc. is as follows
(amounts in millions):
Amount
Working capital, excluding inventories............................................. $1,192
Inventories ......................................................................................... 221
Property and equipment..................................................................... 64
Deferred tax asset............................................................................... 62
Other long term assets........................................................................ 129
Estimated useful life
Intangible assets:
License agreements.........................
.
3 - 10 years 207
Developed software ........................
.
1 - 2 years 68
Game engines..................................
.
2 - 5 years 128
Internally developed franchises ......
.
11 - 12 years 1,124
Retail customer relationships..........
.
< 1 year 40
Favorable leases..............................
.
1 - 4 years 5
Distribution agreements..................
.
4 years 17
Activision trade name.....................
.
Indefinite 385
Goodwill .........................................
.
Indefinite 7,044
Long term liabilities............................
.
(24)
Deferred tax liability...........................
.
(743)
Total consideration .........................
.
$9,919