This excerpt taken from the GLBC 10-K filed Mar 16, 2007.
On October 11, 2006, the Company announced it had received 91% acceptance of its offer to purchase the then issued and outstanding share capital of Fibernet, thereby making the offer unconditional and taking control of Fibernet. The total purchase price including direct costs of the acquisition was approximately 52 pounds sterling (approximately $97). Fibernet is a provider of specialist telecommunications services to large enterprises and other telecommunications and internet service companies primarily located in the United Kingdom and Germany. The Company purchased Fibernet to expand its presence as a provider of telecommunications services in those markets. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of Fibernets operations have been included in the consolidated financial statements as of October 11, 2006.
In connection with the Fibernet acquisition, the Company recorded a non-cash, non-taxable gain from the deemed settlement termination of existing Indefeasible Right of Use (IRU) and telecom services agreements with Fibernet. Under these agreements, the Company earned revenues that, based on current market rates at the acquisition date, were favorable to the Company. In accordance with EITF 04-1, Accounting for Pre-Existing Relationships between the Parties to a Business Combination (EITF 04-1), the Company recognized a $16 gain ($13 recorded as goodwill and $3 as a reduction in pre-acquisition deferred revenue), representing the net present value of the favorable portion of the distribution fee over the remaining life of the agreements. This gain is included in other income, net in the consolidated statement of operations.
GLOBAL CROSSING LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(in millions, except countries, cities, number of sites, square footage,
percentage, share and per share information)
The following table summarizes the allocation of the acquisition cost, including direct costs of the acquisition, to the assets acquired and liabilities assumed at the date of acquisition, based on their estimated fair values.
Of the $24 of acquired intangible assets (9-year weighted-average useful life), $21, $2, and $1 were assigned to customer relationships (10-year weighted-average useful life), customer contracts (4-year weighted-average useful life) and internally developed software (2-year weighted-average useful life), respectively.
The $2 of goodwill was assigned to the enterprise, carrier data and indirect channel segment. None of the goodwill is expected to be deductible for tax purposes.
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of Fibernet had occurred at January 1, 2006 and 2005, respectively:
5. DISCONTINUED OPERATIONS AND DISPOSITIONS