American Express 2008 Annual Report Download - page 79

notes to consolidated financial statements
american express company
77
note 2
acquisitions, divestitures,
and discontinued
operations
acquisitions
Corporate Payment Services
On March 28, 2008, the Company purchased Corporate
Payment Services (CPS), General Electric Company’s
commercial card and corporate purchasing business unit. The
total cash consideration of $2.3 billion paid by the Company
consisted of the contractual purchase price of approximately
$1.1 billion plus the repayment of CPS’ $1.2 billion in
outstanding debt as of the acquisition date.
The following table summarizes the assets acquired and
liabilities assumed by reportable operating segment as of the
acquisition date, reflecting the final purchase price allocation
completed in the fourth quarter of 2008:
(Millions) GCS USCS Total
Other receivables $1,149 $ — $1,149
Other loans — 107 107
Goodwill 818 — 818
Definite-lived intangibles 217 1 218
Premises and equipment 14 — 14
Other assets 3 — 3
Total assets 2,201 108 2,309
Total liabilities 63 2 65
Net assets $2,138 $106 $2,244
The customer receivables and loans acquired as part of the CPS
acquisition, totaling $1.1 billion and $107 million, respectively,
as of the acquisition date, are included in other receivables and
other loans. As underlying cardmember relationships migrate
to the Company’s products, the associated receivables will
be reflected in the cardmember receivables and cardmember
lending lines on the Consolidated Balance Sheets. As of
December 31, 2008, the amount of CPS receivables included
in other receivables and other loans was $880 million and
$99 million, respectively; and, no CPS receivables were
included in cardmember receivables or cardmember lending.
The migration of CPS customers to the Company’s products
is expected to be substantially completed by the first quarter
of 2009.
The acquisition of CPS did not have a significant impact
on the Company’s results of operations for the year ended
December 31, 2008.
divestitures
On May 31, 2007, the Company completed the sale of
its merchant-related activities in Russia for a net gain of
approximately $27 million ($18 million after-tax), recorded
in the Company’s continuing operations, and reflected in the
GNMS segment.
During the third quarter of 2006, the Company completed
the sale of its card and merchant-related activities in Malaysia,
and its card and merchant-related activities in Indonesia for
combined proceeds of $94 million. The transactions generated
a gain of $33 million ($24 million after-tax), and are reported in
the Company’s continuing operations ($23 million in the ICS
segment and $10 million in the GCS segment).
On June 30, 2006, the Company completed the sale of its
card and merchant-related activities and international banking
activities in Brazil for approximately $470 million. The
transaction generated a net after-tax gain of $109 million.
$144 million ($131 million after-tax) of the gain relates to the
card and merchant-related activities sold and is reported in
the Company’s continuing operations ($91 million in the ICS
segment, $28 million in the GCS segment, and $25 million in
the GNMS segment). A $48 million ($22 million after-tax) loss
resulted from the sale of the Company’s international banking
activities; this portion of the sale was reflected in discontinued
operations, as discussed below.
The Company will continue to maintain its presence in the
merchant-related businesses within Russia and in the card and
merchant-related businesses within Malaysia, Indonesia, and
Brazil through its GNS arrangements with the acquirers and
its retention of agreements with multinational merchants.
discontinued operations
On September 18, 2007, the Company entered into an agreement
to sell its international banking subsidiary, American Express
Bank Ltd. (AEB) to Standard Chartered PLC (Standard
Chartered). The sale was completed on February 29, 2008.
In the second quarter of 2008, the Company and Standard
Chartered agreed on the final purchase price of $796 million,
equaling the final net asset value of the AEB businesses that
were sold plus $300 million. The sale resulted in an after-tax
gain of $11 million.
On September 18, 2007, the Company also entered into an
agreement with Standard Chartered to sell American Express
International Deposit Company (AEIDC), a subsidiary that
issues investment certificates to AEB’s customers, 18 months
after the close of the AEB sale through a put/call agreement.
In the third quarter of 2008, AEIDC qualified to be reported
as a discontinued operation as it is the Company’s intention to
exercise its AEIDC put option in the third quarter of 2009.
On June 30, 2006, the Company completed the sale of certain
of its activities in Brazil as discussed above. The international
banking portion of the transaction generated an after-tax loss
of $22 million reported in discontinued operations for banking
activities the Company exited in Brazil. Financial results for these
operations, prior to the second quarter of 2006, were not reclassified
as discontinued operations because such results are not material.