Transactions – 2009 – Acquisition of ESC 90
On June 30, 2009, the Company concluded its acquisition of 100% of the shares of ESC 90 Telecomunicações Ltda. (ESC 90), a major cable-TV and broadband service provider in the cities of Victoria and Vila Velha, State of Espírito Santo. The cash purchase price of R$97,943 (net of cash acquired) exceeded the fair value of assets acquired and liabilities assumed by R$41,384, resulting in goodwill which will be deductible for tax purposes. Management believes the benefits of the transaction include the potential to grow Pay-TV revenues by offering more attractive content to ESC 90 customers, launch the digital TV platform, and strengthen the broadband Internet platform in the market covered by ESC 90. Management also believes there will be medium-term benefits in terms of cost savings arising from operational and financial synergy, and the Company’s competitive position in the market will be improved.
The acquisition has been accounted for using the purchase method and the financial statements and operational earnings of ESC 90 have been consolidated in the Company’s consolidated financial statements as of June 30, 2009.
The fair value of assets acquired and liabilities assumed is as follows:
| |
|
| |
Fair Value on acquisition date |
| Assets |
|
| Property and equipment |
40,475 |
| Intangibles: |
|
| Customers relationship – subscribers |
8,248 |
| Customer relationships – telecommunication |
6,895 |
| Licenses |
30,931 |
| Other assets |
8,641 |
| Total assets acquired |
95,190 |
| |
|
| Liabilities |
|
| Provisions |
(18,036) |
| Other liabilities |
(5,961) |
| Deferred income |
(14,634) |
| Total liabilities assumed |
(38,631) |
| |
|
| Net assets acquired |
56,559 |
| Purchase price, net of cash acquired |
97,943 |
| |
|
| Goodwill |
41,384 |
Transactions – 2008 – Acquisition of BigTv
On December 29, 2008, the Company acquired for R$372,508 cash, net of cash acquired, 100% of the outstanding shares and quotas with voting rights, of 614 Telecomunicações Ltda. and its subsidiaries which have operations in the Pay-TV and Broadband Internet market under the BigTv brand (BigTv Companies).
The transaction resulted in the recognition of goodwill in the amount of R$278,098. The Company incurred other acquisition costs of R$5,589, which are included in the purchase price.
The acquisition has been accounted for using the purchase method and the financial statements and operational earnings of BigTv Companies have been consolidated in the Company’s consolidated financial statements as of December 29, 2008.
BigTv Companies are Pay-TV and broadband Internet service providers in Brazil, which have operations in 12 cities, in the States of São Paulo (Guarulhos, Valinhos, Botucatu, Jaú, Sertãozinho and Marília), Paraná (Ponta Grossa, Cascavel, Cianorte and Guarapuava), Alagoas (Maceió) and Paraíba (João Pessoa). The acquisition of BigTv Companies will allow the Company to increase its operational geographical area in the most prosperous areas of the country. Management believes the benefits of the transaction include the opportunity to increase the Pay TV revenues by offering content at attractive terms, launching its digital platform in markets covered by BigTv Companies and strengthening its broadband platform in important markets in the States served by BigTv Companies. Management also believes the Company will benefit over the medium-term through cost reductions and operational and financial synergies and the acquisition will improve its competitive position among current and future competitors.
The fair value of assets acquired and liabilities assumed is as follows:
| |
|
|
Fair value on acquisition date |
| Assets |
|
| Property and equipment |
87,180 |
| Intangibles |
|
| Customer relationships |
16,223 |
| Licenses |
94,602 |
| Other assets |
8,427 |
| Total assets acquired |
206,432 |
| |
|
| Liabilities |
|
| Tax installment plan |
(1,756) |
| Provisions |
(36,053) |
| Other liabilities |
(27,945) |
| Deferred income |
(46,268) |
| Total liabilities assumed |
(112,022) |
| |
|
| Net assets acquired |
94,410 |
| Purchase price net of cash acquired |
372,508 |
| Goodwill |
278,098 |
Revenues and net income of the acquired company in the period prior to the acquisition dates are not shown as these amounts are not material to the consolidated financial statements.