Twenty-First Century Fox 2014 Annual Report Download - page 97

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
91
in Other, net in the Consolidated Statement of Operations for the fiscal year ended June 30, 2013. The aggregate
excess purchase price of $1,030 million, including the revalued previously held investment of $280 million and
contract-related liabilities of approximately $450 million, has been allocated as follows: $190 million to amortizable
intangible assets, primarily MVPD affiliate agreements and relationships, with useful lives ranging from 8 to 15
years, and approximately $840 million representing the goodwill on the transaction. The goodwill reflects the
synergies and increased market penetration expected from combining the operations of Fox Sports Asia and the
Company.
SportsTime Ohio
In December 2012, the Company acquired SportsTime Ohio, a RSN serving the Cleveland, Ohio market, for
an estimated total purchase price, including post-closing costs, of approximately $285 million, of which $135
million was in cash. The balance of the purchase price represents the fair value of deferred payments and payments
that are contingent upon the achievement of certain performance objectives. The excess purchase price of
approximately $275 million has been allocated as follows: $135 million to amortizable intangible assets, primarily
MVPD affiliate agreements and relationships, with useful lives ranging from 8 to 20 years, and approximately $140
million representing the goodwill on the transaction. The goodwill reflects the synergies and increased market
penetration expected from combining the operations of the RSN and the Company. The contingent consideration
was valued using an income approach using a probability-weighted discounted cash flow method and is remeasured
to fair value at each reporting date until the contingency is resolved.
Sky Deutschland
During fiscal 2013, the Company acquired, through a combination of a private placement and a rights
offering, approximately 92 million additional shares of Sky Deutschland increasing the Company’s ownership
interest to 55%. The remaining 45% of Sky Deutschland not owned by the Company has been recorded at fair value
of approximately $2.3 billion, based on the closing price of its shares on the Frankfurt Stock Exchange on the date
control was acquired (a Level 1 measurement as defined in Note 8 – Fair Value). The aggregate cost of shares
acquired by the Company was approximately €410 million (approximately $550 million). The carrying amount of
the Company’s previously held equity interest in Sky Deutschland was revalued to fair value as of the acquisition
date, resulting in a gain of approximately $2.1 billion which was included in Other, net in the Consolidated
Statement of Operation for the fiscal year ended June 30, 2013. The aggregate excess purchase price has been
allocated as follows: approximately $1.7 billion to intangible assets, primarily consisting of subscriber relationships,
with a useful life of 11 years, and the indefinite-lived Sky trade name, approximately $4.3 billion representing the
goodwill on the transaction and the related deferred tax liabilities. As a result of these transactions, the Company has
the power to control Sky Deutschland and the results of Sky Deutschland were included in the Company’s
consolidated results of operations beginning in January 2013. Prior to the acquisition of the additional 5% ownership
interest, the Company accounted for its investment in Sky Deutschland under the equity method of accounting and
the Company’s investment consisted of common stock, convertible bonds and loans.
The Company has guaranteed Sky Deutschland’s €300 million (approximately $410 million) five-year bank
credit facility, of which €225 million ($308 million) has been utilized and is included in Borrowings. In connection
with the consolidation of Sky Deutschland, the Company assumed approximately $480 million in bank debt, which
Sky Deutschland repaid in full during fiscal 2013. Additionally, the Company is the guarantor to the German
Football League for Sky Deutschland’s Bundesliga broadcasting license for the 2013-2014 to 2016-2017 seasons in
an amount up to 50% of the license fee per season and the Company has also agreed to extend the maturity of
existing shareholder loans that were issued before it became a consolidated subsidiary.
In January 2011, the Company purchased a convertible bond from Sky Deutschland for approximately $225
million. The Company currently has the right to convert the bonds into 53.9 million underlying Sky Deutschland
shares, subject to certain black-out periods. If not converted, the Company will redeem the bonds for cash upon their
maturity in January 2015. The convertible bonds were separated into their host and derivative financial instrument
components. Prior to Sky Deutschland becoming a consolidated subsidiary, both the host and derivative financial
instrument components were recorded at their estimated fair value in Investments in the Consolidated Balance
Sheets. The change in estimated fair value of the security (derivative instrument) resulted in a gain of $58 million
and a loss of $61 million and were recorded in Other, net in the Company’s Consolidated Statements of Operations