Electronic Arts 2009 Annual Report Download - page 163

Annual Report
VG Holding Corp.
On January 4, 2008, we acquired all of the outstanding shares of VG Holding Corp. (“VGH”), owner of both
BioWare Corp. and Pandemic Studios, LLC, which create action, adventure and role-playing games. BioWare
and Pandemic Studios are located in Edmonton, Canada; Los Angeles, California; and Austin, Texas. This
acquisition positions us for further growth in role-playing, action and adventure genres. We paid approximately
$2 per share to the stockholders of VGH and assumed all outstanding stock options for an aggregate purchase
price of $682 million, including transaction costs. Separate from the purchase price and prior to January 4, 2008,
we loaned VGH $30 million. The following table summarizes the estimated fair values of assets acquired and
liabilities assumed as of March 31, 2008, in connection with our acquisition of VGH during the fiscal year ended
March 31, 2008 (in millions):
Current assets ......................................................................... $ 68
Property and equipment, net .............................................................. 8
Acquired in-process technology ........................................................... 138
Goodwill ............................................................................. 414
Finite-lived intangibles .................................................................. 114
Long-term deferred taxes ................................................................ 9
Other liabilities ........................................................................ (69)
Total purchase price .................................................................. $682
The results of operations of VGH and the estimated fair market values of the acquired assets and assumed
liabilities have been included in our Consolidated Financial Statements since the date of acquisition.
Except for acquired in-process technology, which is discussed below, acquired finite-lived intangible assets are
being amortized on a straight-line basis over their estimated lives ranging from three to five years. The intangible
assets that make up that amount as of the date of the acquisition include:
Gross Carrying
Amount
(in millions)
Weighted-Average
Useful Life
(in years)
Developed and Core Technology ..................................... $ 51 4
Trade Names and Trademarks ....................................... 41 5
Other Intangibles ................................................. 22 3
Total Finite-Lived Intangibles ..................................... $114 4
Approximately $47 million of the goodwill recognized upon acquisition is deductible for tax purposes.
In connection with our acquisition of VGH, we incurred acquired in-process technology charges of $138 million
in relation to game software that had not reached technical feasibility as of the date of acquisition. The fair value
of VGH’s products under development was determined using the income approach, which discounts expected
future cash flows from the acquired in-process technology to present value. The discount rates used in the present
value calculations were derived from a weighted average cost of capital of 17 percent. Should the in-process
software not be successfully completed, completed at a higher cost, or the development efforts go beyond the
timeframe estimated by management, we will not receive the full benefits anticipated from the acquisition.
Benefits from the development efforts began to be received in fiscal year 2009 and the development efforts are
expected to be completed in fiscal year 2011.
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