GE 2005 Annual Report Download - page 114

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(114)
In May 2004, we completed the combination of NBC with VUE and certain related assets to create one of
the world’ s leading media companies, NBC Universal, Inc. (NBC Universal). Twenty percent of NBC Universal’ s
shares were issued to a subsidiary of Vivendi Universal (VU) as partial consideration for VU’ s interest in VUE and
the related assets. NBC’ s acquired interest in VUE and the related assets were valued at $14,429 million, for which
we exchanged the NBC Universal shares, paid cash to certain VUE interest holders of $3,650 million and assumed
debt of $2,498 million. In March 2004, we had issued 119.4 million shares of our common stock for net cash
proceeds of $3,765 million, and we used most of those proceeds to fund the $3,650 million we paid in this
transaction. The final allocation of our acquired interest assigned $10,156 million to goodwill, $1,503 million to
indefinite-lived intangibles and $307 million to identified intangible assets that are being amortized over periods
ranging from two to 20 years. As a result of issuing the NBC Universal shares, we essentially disposed of 20% of
NBC, and therefore recorded an increase in shareowners’ equity of $2,153 million, net of taxes of $1,439
million. IAC/InteractiveCorp (IAC), the holder of 5.44% of the VUE common interests, did not participate in the
transaction and remained a minority interest holder of VUE at December 31, 2004. IAC also owned two series of
VUE preferred interests at that date-$758 million of mandatorily redeemable Preferred A interests that we recorded
as a liability and $1,582 million of cumulative redeemable Preferred B interests that we included in minority
interest. As of the same date and in approximately the same amounts, VUE held U.S. Treasury securities as an
economic hedge of the redemption of the Preferred A interests; and NBC Universal held IAC securities that could be
used to redeem the Preferred B interests. We also agreed to provide VU any excess value in the IAC securities. The
combined position provided an effective hedge of the disposition of those shares.
In June 2005, NBC Universal, VU and IAC jointly agreed to unwind various interrelated financial interests
pertaining to the IAC investments described above. As part of that agreement, NBC Universal fully settled its
obligations in connection with both the Preferred A and B interests in exchange for the U.S. Treasury securities, the
IAC securities and $200 million cash. NBC Universal recognized a $318 million pre-tax gain on the final fair value
adjustments to its various affected financial instruments as of the transaction date ($127 million, net of taxes and
minority interest of $133 million and $58 million, respectively); and recorded an increase in shareowners’ equity of
$108 million on the fair value exchange, net of taxes and minority interest of $82 million and $32 million,
respectively. Also as part of that agreement, NBC Universal acquired IAC’ s 5.44% common interest in VUE for
cash of $800 million, including $160 million funded by VU, and other consideration of $115 million. The
preliminary allocation of its acquired interest assigned $329 million to goodwill and $31 million to intangible assets.
VU’ s right to monetize its ownership interest over time at fair value was amended to begin in 2007.