Expedia 2015 Annual Report Download - page 111

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Inc. common stock to certain employee stockholders in five equal increments on or about each of the first
through fifth anniversaries of the acquisition. The number of shares of Expedia common stock was calculated
based on the aggregate value of 43 million using a thirty-day trailing average of closing trading prices and
exchange rates prior to acquisition. During the first quarter of 2014 and 2015, we issued the first two increments
of 175,040 shares of Expedia, Inc. common stock. Also in conjunction with the acquisition, we replaced certain
employee stock-based awards of the acquiree, which related to pre-combination service, for an acquisition date
fair value of $15 million.
As a result of the acquisition, we expensed $66 million to acquisition-related and other on the consolidated
statements of operations during 2013, which included approximately $57 million in stock-based compensation
related to the issuance of the 875,200 shares of common stock as the issuance was determined separate from the
business combination and was not contingent upon any future service or other certain event except the passage of
time as well as approximately $10 million for the amount paid to settle a portion of the employee compensation
plan of trivago, which was considered separate from the business combination. The stock-based compensation
expense was measured using the closing price of Expedia, Inc. common stock as of the acquisition date
multiplied by the number of shares to be issued. Acquisition-related costs were expensed as incurred and were
not significant. The aggregate purchase price consideration was $570 million, which included the cash paid to
shareholders of trivago of $554 million as well as $15 million for replaced employee stock-based awards of the
acquiree. The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows,
in thousands:
Goodwill $ 633,436
Intangible assets with indefinite lives 220,416
Intangible assets with definite lives(1) 136,281
Net assets(2) 19,064
Deferred tax liabilities (111,379)
Redeemable noncontrolling interest (343,984)
Total $ 553,834
(1) Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-
compete agreement assets and have estimated useful lives of between three and seven years with a weighted
average life of 3.7 years.
(2) Includes cash acquired of $13 million.
The value of the replaced employee stock-based awards of the acquiree was included in the purchase price
allocation with a corresponding offset to redeemable noncontrolling interest, because the replacement awards
were issued in subsidiary stock.
The goodwill of $633 million is primarily attributed to assembled workforce, operating synergies and
potential expansion into other global markets. The goodwill has been allocated to the trivago segment and is not
expected to be deductible for tax purposes.
The fair value of the 37% noncontrolling interest was estimated to be $344 million at the time of acquisition
based on the fair value per share, excluding the control premium. The control premium was derived directly
based on the additional consideration paid to certain shareholders in order to obtain control. The additional
consideration was determined to be the best estimate to represent the control premium as it was a premium paid
only to the controlling shareholders. In addition, the purchase agreement contains certain put/call rights whereby
we may acquire and the minority shareholders of trivago may sell to us up to 50% and 100% of the minority
shares of the company at fair value during two windows, the first of which opens in the first quarter of 2016 and
the second opens in 2018. As the noncontrolling interest is redeemable at the option of the minority holders, we
classified the balance as redeemable noncontrolling interest with future changes in the fair value above the initial
basis recorded as charges or credits to retained earnings (or additional paid-in capital in absence of retained
F-26