Best Buy 2011 Annual Report Download - page 88

$ in millions, except per share amounts or as otherwise noted
2. Acquisitions
Five Star
We acquired a 75% interest in Jiangsu Five Star Appliance Co., Ltd. (‘‘Five Star’’) in June 2006, for $184, which included
a working capital injection of $122. At the time of the acquisition, we also entered into an agreement with Five Star’s
minority shareholders to acquire the remaining 25% interest in Five Star within four years, subject to Chinese government
approval.
In February 2009, we acquired the remaining 25% interest in Five Star, which converted Five Star into a wholly-owned
foreign enterprise. The $196 purchase price for the remaining 25% interest was primarily based on a previously agreed-
upon pricing formula, consisting of a base purchase price and an earn-out for the remaining Five Star shareholders. At
the time of the initial purchase, we agreed to pay an amount in excess of the fair value of the net assets acquired to
further our international growth plans and accelerate the integration of Best Buy and Five Star stores in China.
The acquisition of the remaining 25% interest in Five Star for $196 was accounted for using the purchase method. We
recorded the net assets acquired at their estimated fair values. We included Five Star’s operating results, which are
reported on a two-month lag, from the date of acquisition as part of our International segment. The allocation of the
purchase price to the acquired assets and liabilities was finalized in the fourth quarter of fiscal 2010, with no material
adjustments made to the preliminary allocation. None of the goodwill is deductible for tax purposes.
The final purchase price allocation for the remaining 25% interest in Five Star was as follows:
Net assets of noncontrolling interests $48
Tradename 8
Goodwill 142
Total assets 198
Long-term liabilities (2)
Purchase price allocated to assets and liabilities acquired $196
Napster
In October 2008, we acquired Napster, Inc. (‘‘Napster’’) for $122 (or $101 net of cash acquired), pursuant to a cash
tender offer whereby all issued and outstanding shares of Napster common stock, and all stock purchase rights associated
with such shares, were acquired by us at a price of $2.65 per share. Of the $122 purchase price, $4 represented our
previous ownership interest in Napster common shares. The effective acquisition date for accounting purposes was the
close of business on October 31, 2008, the end of Napster’s fiscal October.
We entered into this transaction as we believe Napster has one of the most comprehensive and easy-to-use digital music
offerings in the industry. The amount we paid in excess of the fair value of the net assets acquired was to obtain Napster’s
capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting
music and other digital entertainment products over an increasing array of devices, such as bundling the sale of hardware
with digital services. We believe the combined capabilities of our two companies allows us to build stronger relationships
with customers and expand the number of subscribers.
We have consolidated Napster in our financial results as part of our Domestic segment from the date of acquisition. We
recorded the net assets acquired at their estimated fair values and allocated the purchase price on a preliminary basis
using information then available. The allocation of the purchase price to the acquired assets and liabilities was finalized in
the third quarter of fiscal 2010, with no material adjustments made to the preliminary allocation. None of the goodwill is
deductible for tax purposes.
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