Sprint - Nextel 2013 Annual Report Download - page 136

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
common stock of Clearwire, par value
$0.0001 per share, other than shares owned by Sprint Communications, was converted into the right to receive $5.00 per
share in cash. The cash consideration paid totaled approximately
$3.5 billion , net of cash acquired of $198 million . Approximately $125 million of the cash
consideration was accrued as "Accrued expenses and other current liabilities" on the consolidated balance sheet for dissenting shares relating to stockholders
who exercised their appraisal rights.
Consideration
The fair value of consideration, which is measured at the estimated fair value of each element of consideration transferred as of the Clearwire
Acquisition Date, was determined as the sum of (a) cash transferred to Clearwire stockholders, which included
$125 million of cash, which was held in escrow for
dissenting shares, (b) the estimated fair value of Clearwire shares held by Sprint Communications immediately preceding the acquisition and (c) share
- based
payment awards (replacement awards) exchanged for awards held by Clearwire employees. The fair value of the consideration transferred was based on the most
reliable measure for each element of consideration, which was determined to be the market price of Clearwire common shares as of the Clearwire Acquisition
Date for all non
- cash consideration.
The estimated fair value of the consideration transferred, based on the market price of Clearwire common shares, as determined using the closing
price on the NASDAQ as of the Clearwire Acquisition Date, consisted of the following:
_________________
Acquisition
- related costs (included in selling, general and administrative in the results of operations) for the Clearwire Acquisition totaled
approximately
$19 million , of which $2 million were recognized in the Predecessor year ended 2012 and $17 million was recognized in the Predecessor 191 - day
period ended July 10, 2013.
Preliminary Purchase Price Allocation
The consideration transferred has been preliminarily allocated to assets acquired and liabilities assumed based on their estimated fair values at the
time of the Clearwire Acquisition. The preliminary allocation of consideration transferred was based on management's judgment after evaluating several factors,
including a preliminary valuation assessment. Additional analysis, including, but not limited to, the value of intangible assets, and any associated tax impacts,
could result in a change in the total amount of goodwill. The preliminary allocation represents management's current best estimate of fair value, but these
amounts could change as additional information is obtained and evaluated. Adjustments made since the initial purchase price allocation decreased recorded
goodwill by approximately
$283 million and are primarily attributable to a reduction of approximately $270 million made to deferred tax liabilities as a result of
additional analysis. The remaining adjustments were insignificant.
Of the total acquisition
- related costs, the contingent acquisition - related costs paid by, or incurred by, Sprint Communications, approximately $7
million were recorded as an expense in the Predecessor period. The following table summarizes the preliminary purchase price allocation of consideration in the
Clearwire Acquisition:
F - 18
Consideration:
Cash to acquire the remaining equity interests of Clearwire
$
3,681
Estimated value of Sprint's previously - held equity interests(1)
3,251
Liability to holders of Clearwire equity awards for services provided in the pre - acquisition period(2)
59
Total purchase price to be allocated
$
6,991
(1)
Equals the estimated fair value of Sprint Communications' previously-held equity interest in Clearwire valued at $4.40 per share, which represented an approximate 12% discount
to Sprint Communications' acquisition price for shares not held by Sprint Communications prior to the Clearwire Acquisition Date. The difference between $4.40 and the per share
merger consideration of $5.00 represents an estimate of a control premium, which would not generally be included in the valuation of Sprint Communications' non-controlling
interest.
(2)
$47 million of the liability was paid in cash pursuant to the Clearwire Merger Agreement.