Avis 2012 Annual Report Download - page 72

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F-16
6. Acquisitions
Apex Car Rentals
In October 2012, the Company completed the acquisition of the assets of Apex, a leading deep-value car rental company
in New Zealand and Australia, operating a fleet of approximately 4,000 rental vehicles. In conjunction with the
acquisition, the Company paid $63 million in cash (including the acquisition of fleet) and agreed to the payment of
contingent consideration with an estimated acquisition date fair value of $9 million. The contingent consideration
consists of a maximum of $26 million in additional payments that are contingent on Apex’s future financial performance,
and the fair value of the contingent consideration at the acquisition date was estimated by utilizing a Monte Carlo
simulation technique, based on a range of possible future results. The preliminary allocation of the purchase price of
Apex principally includes vehicles of $33 million, trademarks of $21 million and goodwill of $16 million which were
allocated to the Company’s International segment. The goodwill is not expected to be deductible for tax purposes. The
fair values of certain tangible assets acquired, identifiable intangible assets, and residual goodwill are not yet finalized
and are subject to change. Apex’s revenues, earnings and assets are not material to the Company’s results or balance
sheet.
Avis Europe
On October 3, 2011, the Company completed the acquisition of the entire issued share capital of Avis Europe for $976
million and subsequently repaid $649 million of Avis Europe’s assumed indebtedness. Avis Europe provides vehicle
rental and ancillary products and services in Europe, the Middle East, Africa and Asia. The acquisition reunited the
global operation of the Avis and Budget brands under one corporate umbrella.
The Company recorded a $117 million net, non-cash charge, within transaction-related costs, related to the reacquired
unfavorable license rights that provided Avis Europe with royalty-free license rights within certain territories. This net
charge reflects the difference, as of the acquisition date, between the fair value of the license rights and their contractual
value. The Company used a relief from royalty rate analysis to determine the fair value. This valuation considered, but
was not limited to, (i) the contracted royalty rates, (ii) the market royalty rate and (iii) the term of the license contracts.
The excess of the purchase price over fair value of net assets acquired was allocated to goodwill, which was assigned to
the Company’s International segment. The goodwill is not expected to be deductible for tax purposes. The fair value of
the assets acquired and liabilities assumed, as set forth in the table below, reflect various fair value estimates and
analyses, including work performed by third-party valuation specialists. The following summarizes the allocation of the
purchase price of Avis Europe:
Cash
$
136
Receivables
245
Other current assets
213
Property and equipment
91
Deferred income taxes
27
Other intangibles
254
Other non-current assets
31
Vehicles
1,706
Receivables from vehicle manufacturers and other
282
Total identifiable assets acquired
2,985
Accounts payable and other current liabilities
(552)
Debt
(763)
Other non-current liabilities
(322)
Liabilities under vehicles program – debt
(779)
Total liabilities assumed
(2,416)
Net assets acquired
569
Goodwill
290
Non-cash charge related to the reacquired unfavorable license rights
117
Total
$
976