Eversource 2012 Annual Report Download - page 89

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2. MERGER OF NU AND NSTAR
On April 10, 2012, NU acquired 100 percent of the outstanding common shares of NSTAR. Pursuant to the terms and conditions of the
Agreement and Plan of Merger, as amended, the "Merger Agreement," NSTAR merged into NSTAR LLC, becoming a wholly-owned
subsidiary of NU.
NSTAR LLC is a holding company engaged through its subsidiaries in the energy delivery business serving electric and natural gas
distribution customers in Massachusetts. The merger was structured as a merger of equals in a tax-free exchange of shares. As part
of the merger, NSTAR shareholders received 1.312 NU common shares for each NSTAR common share owned (the "exchange ratio")
as of the acquisition date. The exchange ratio was structured to result in a no-premium merger based on the average closing share
price of each company's common shares for the 20 trading days preceding the announcement of the merger in October 2010. NU
issued approximately 136 million common shares to the NSTAR shareholders as a result of the merger, which brought the total
common shares outstanding to approximately 314 million shares as of April 10, 2012.
Purchase Price: Pursuant to the merger, all of the NSTAR common shares were exchanged at the fixed exchange ratio of 1.312 NU
common shares for each NSTAR common share. The total consideration transferred in the merger was based on the closing price of
NU common shares on April 9, 2012, the day prior to the date the merger was completed, and was calculated as follows:
NSTAR common shares outstanding as of April 9, 2012 (in thousands)*
103,696
Exchange ratio
1.312
NU common shares issued for NSTAR common shares outstanding (in thousands)
136,049
Closing price of NU common shares on April 9, 2012
$
36.79
Value of common shares issued (in millions)
$
5,005
Fair value of NU replacement stock-based compensation awards related to
pre-merger service (in millions)
33
Total purchase price (in millions)
$
5,038
* Includes 109 thousand shares related to NSTAR stock-based compensation awards that vested immediately prior to the merger
Certain of NSTAR’s stock-based compensation awards, including deferred shares, performance shares and all outstanding stock
options, were replaced with NU awards using the exchange ratio upon consummation of the merger. In accordance with accounting
guidance for business combinations, the portion of the fair value of these awards attributable to service provided prior to the merger is
included in the purchase price as it represents consideration transferred in the merger. See Note 10D, "Employee Benefits – Share-
Based Payments," for further information.
Purchase Price Allocation: The allocation of the total purchase price to the estimated fair values of the assets acquired and liabilities
assumed has been determined based on the accounting guidance for fair value measurements, which defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The allocation of the total purchase price includes adjustments to record the fair value of NSTAR’s unregulated
telecommunications business, regulatory assets not earning a return, lease agreements, long-term debt and the preferred stock of
NSTAR Electric. The fair values of NSTAR's assets and liabilities were determined based on significant estimates and assumptions,
including Level 3 inputs, that are judgmental in nature. These estimates and assumptions include the timing and amounts of projected
future cash flows and discount rates reflecting risk inherent in future cash flows.
The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as
goodwill. The completed allocation of the purchase price is as follows:
(Billions of Dollars)

Current Assets

$ 0.7
Property Plant and Equipment, Net
5.1
Goodwill
3.2
Other Long-Term Assets, excluding Goodwill
2.1
Current Liabilities
(1.3)
Long-Term Liabilities
(2.7)
Long-Term Debt and Other Long-Term Obligations
(2.1)
Total Purchase Price $ 5.0
The goodwill from the merger with NSTAR of $3.2 billion has been assigned to NU's reporting units based on relative fair values. NU's
reporting units consist of Electric Distribution, Electric Transmission and Natural Gas Distribution. See the "Goodwill" section below for
the allocation of goodwill to each reporting unit.
Pro Forma Financial Information: The following unaudited pro forma financial information reflects the pro forma combined results of
operations of NU and NSTAR and reflects the amortization of purchase price adjustments assuming the merger had taken place on
January 1, 2011. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily
indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of
NU.