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52 COGECO CABLE INC. 2008 Notes to the Consolidated Financial Statements
B) FISCAL 2007 ADJUSTMENTS RELATED TO FISCAL 2006 BUSINESS ACQUISITION
On June 2, 2006, the Corporation entered into an agreement with Cable Satisfaction International Inc. (“CSII”), Catalyst Fund
Limited Partnership I and Cabovisão—Televisão por Cabo, S.A. (“Cabovisão”), to purchase, for a total consideration of
€461.8 million ($667.5 million), all the shares of Cabovisão, the second largest cable telecommunications company in Portugal, an
indirect wholly-owned subsidiary of CSII. The price includes the purchase of senior debt and reimbursement of certain other
Cabovisão liabilities. The acquisition was completed on August 1, 2006 and the final purchase price has been determined following
completion of a post-closing working capital adjustment that occurred on March 9, 2007. According to the agreement, the final
purchase price was reduced by an amount of €2,194,000 ($3,371,000).
The acquisition was accounted for using the purchase method. The results of Cabovisão have been consolidated as of the
acquisition date.
In 2007, management completed its valuations of tangible and intangible assets acquired and liabilities assumed and the final
allocation is as follows:
(in thousands of dollars) $
CONSIDERATION PAID
PURCHASE PRICE OF SHARES 304,188
WORKING CAPITAL ADJUSTMENT (3,371)
SECURED LENDERS’ DEBT AND CERTAIN SPECIFIED CABOVISÃO LIABILITIES 274,761
ACQUISITION COSTS 6,299
581,877
NET ASSETS ACQUIRED
CASH AND CASH EQUIVALENTS 5,711
RESTRICTED CASH 489
ACCOUNTS RECEIVABLE 16,570
PREPAID EXPENSES 1,324
FIXED ASSETS 323,796
CUSTOMER RELATIONSHIPS 71,684
GOODWILL 344,004
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ASSUMED (60,433)
OTHER SPECIFIED CABOVISÃO LIABILITIES ASSUMED (91,914)
FUTURE INCOME TAX LIABILITIES (29,354)
581,877
The final allocation resulted in an increase in fixed assets of $36,144,000, an increase in customer relationships of $71,684,000 and
an increase in future income tax liabilities of $29,354,000, as well as a decrease in accounts payable and accrued liabilities
assumed of $4,849,000. The net impact of these adjustments, combined with the reduction of the purchase price, reduced goodwill
by $87,020,000 (see note 10 B)).
Also, in accordance with the Portuguese Companies Income Tax Code (“CIRC”), accumulated tax losses cannot be deducted if the
ownership of at least 50% of the social capital changes from the moment when the tax losses were generated, unless a request is
filed before such change in the ownership takes place, subject to approval by the Portuguese tax authorities. To this effect, a
request for preservation of tax losses was filed by Cabovisão on July 28, 2006, and Cabovisão has not yet obtained a response
from the tax authorities. Consequently, the losses generated prior to acquisition have not been included in the purchase price
allocation, but will be recorded as a reduction of goodwill upon realisation (see note 6).