Expedia 2015 Annual Report Download - page 106

included $20 million for the portion of certain unvested employee options and restricted stock unit awards of
HomeAway attributable to pre-combination service, which were replaced with Expedia awards in conjunction
with the acquisition and measured at fair value on the acquisition date. The fair value for the portion of the
awards attributable to post-combination service was $106 million, net of estimated forfeitures.
Due to the limited amount of time since the acquisition of HomeAway, the purchase price allocation was
based on a preliminary valuation of the assets acquired and liabilities assumed and is subject to revision as more
detailed analyses are completed and additional information about the fair value of assets acquired and liabilities
assumed become available. The final allocation may include changes to the acquisition date fair value of
intangible assets, goodwill, deferred taxes, deferred revenue as well as operating assets and liabilities. The
following summarizes the preliminary allocation of the purchase price for HomeAway, in thousands:
Cash $ 900,281
Other current assets(1) 54,665
Long-term assets 81,564
Intangible assets with definite lives(2) 555,600
Intangible assets with indefinite lives(3) 196,900
Goodwill 2,602,712
Deferred revenue (182,978)
Other current liabilities (104,316)
Debt (402,500)
Other long-term liabilities (31,122)
Deferred tax liabilities, net (108,477)
Total $3,562,329
(1) Gross accounts receivable was $25 million, of which $1 million was estimated to be uncollectible.
(2) Acquired definite-lived intangible assets primarily consist of supplier relationships, customer relationships
and developed technology assets with average lives ranging from less than one to twelve years and an
estimated combined weighted average useful life of 5.73 years.
(3) Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.
The goodwill of $2.6 billion is primarily attributable to assembled workforce and operating synergies as it
relates to the shift to a transaction model. The goodwill has been allocated to the new HomeAway reportable
segment and is not expected to be deductible for tax purposes.
We assumed approximately $403 million of 0.125% Convertible Senior Notes due 2019 (the “Convertible
Notes”) in connection with the HomeAway acquisition. However, following the consummation of the
HomeAway acquisition, we subsequently delivered a notice to holders of the Convertible Notes, as required per
the terms of the Convertible Notes indenture, to which each holder of the Convertible Notes had the right to
(i) require the Company to repurchase its Convertible Notes for cash at a price equal to 100% of the principal
amount of such notes plus accrued and unpaid interest or (ii) convert its Convertible Notes, at a specified
conversion rate into HomeAway common stock (which, following consummation of the HomeAway acquisition,
represented the right to receive the transaction consideration) or (iii) allow the Convertible Notes to remain
outstanding for the remaining term. As a result, the majority of the Convertible Notes, or $377 million, were
repurchased during the January 2016, and we have therefore determined the fair value of the Convertible Notes
on the date of acquisition to be equal to the principal amount of the Convertible Notes.
In connection with the issuance of the Convertible Notes, HomeAway also sold warrants (the “Warrants”) to
acquire approximately 7.7 million shares of HomeAway common stock. As a result of the merger, the Warrant
holders had the right to terminate the Warrants at fair value as determined in a commercially reasonable manner.
A portion of such Warrants were settled on December 16, 2015 for $23 million in cash, with the $8 million
remainder settled in January 2016.
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