Business Acquisitions - Divestitures
|9 Months Ended|
Oct. 29, 2022
|Business Acquisitions - Divestitures|
|Business Acquisitions - Divestitures||
(15) Business Acquisitions - Divestitures
On November 5, 2021, the Company and its wholly-owned subsidiary iMedia &1-2-3.tv Holding GmbH (the “Subsidiary”) closed on the acquisition of 1-2-3.tv Group from Emotion Invest GmbH & Co. KG, BE Beteiligungen Fonds GmbH & Co. geschlossene Investmentkommanditgesellschaft and Iris Capital Fund II (collectively, the “1-2-3.tv Sellers”).
At the closing of the acquisition, the Company acquired 1-2-3.tv Group from the Sellers for an aggregate purchase price of EUR 89,680 ($103,621 based on the November 5, 2021 exchange rate) (the “Enterprise Value”). The Company paid to the Sellers EUR 1,832 ($2,117 based on the November 5, 2021 exchange rate) for the 1-2-3.tv Group’s cash on-hand as of July 31, 2021 and EUR 966 ($1,116 based on the November 5, 2021 exchange rate) for the 1-2-3.tv Group’s excess working capital above the 1-2-3.tv Group’s trailing twelve-month average as of July 31, 2021. The Enterprise Value consideration consisted of the payment to the Sellers of EUR 68,200 in cash at closing ($78,802 based on the November 5, 2021 exchange rate) and the Company entering into a seller note agreement in the principal amount of EUR 18,000 ($20,800 based on the November 5, 2021 exchange rate) (the “seller notes”) and fair value of EUR 18,800 ($21,723 based on the November 5, 2021 exchange rate). The seller notes are payable in two EUR 9,000 ($10,400 based on the November 5, 2021 exchange rate) installments due on the first and second anniversaries of the issuance date. The seller notes bear interest at a rate equal to 8.50% per annum, payable semi-annually commencing on the six-month anniversary of closing.
The acquisition of 1-2-3.tv was accounted for in accordance with ASC 805-10 “Business Combinations”. The allocation of the purchase price was based upon a valuation, and the Company’s estimates and assumptions of the assets acquired, and liabilities assumed.
Purchase accounting with respective to tangible assets acquired and liabilities assumed have been completed, the total consideration of $103,621 has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows:
Goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed. Goodwill amounted to $70,634, including assembled workforce.
During the first quarter ended April 30, 2022, the Company made certain adjustments to the preliminary price allocation made as of January 29, 2022 to better reflect the price allocated to goodwill and the identifiable intangible assets acquired. The Company
determined these adjustments after additional analysis and assessment of the valuation methodologies. Subsequent to these adjustments, the Company’s purchase price allocation was finalized as of October 29, 2022.
The 1-2-3.tv Sellers may receive additional consideration from the Subsidiary, if earned, in the form of earn-out payments in the amount of up to EUR 14,000 based on revenues of the 1-2-3.tv Group during 2022, and up to an additional EUR 14,000 per year for 2023 and 2024 based on revenues of the 1-2-3.tv Group during each of 2023 and 2024, with the ability of the 1-2-3.tv Sellers to earn amounts in excess of the EUR 14,000 in 2023 and 2024 in the event the maximum earn-out payments are not earned in either 2022 or 2023, respectively; provided, that in no event shall the total earn-out amount exceed EUR 42,000 ($48,531 based on the November 5, 2021 exchange rate). The Company has agreed to guarantee all obligations of its subsidiary to the 1-2-3.tv Sellers. As of November 5, 2021, the estimated fair value of the earn-out payment amounted to EUR 2,680 ($3,097 based on November 5, 2021 exchange rate). As of October 29, 2022, the estimated recorded liability of the earn-out payments was EUR 2,680 ($2,741 based on the October 29, 2022 exchange rate).
Supplemental Pro Forma Information
1-2-3.tv had sales of approximately $43,172 and $136,597 for the three and nine-months ended October 30, 2021, a significant portion of which was derived from its operations in Europe. 1-2-3.tv’s results have been included since the date of the acquisition.
The unaudited proforma information below, as required by GAAP, assumes that the 1-2-3.tv Group had been acquired at the beginning of fiscal 2022 and includes the effect of transaction accounting adjustments. These adjustments include the amortization of acquired intangible assets, depreciation of the fair value step-up of acquired property, plant and equipment, amortization of inventory fair value step-up (assumed to be fully amortized in fiscal 2022) in connection with the acquisition.
This unaudited proforma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have resulted had the acquisition been in effect at the beginning of fiscal 2021. In addition, the unaudited proforma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.
The following table presents proforma net sales and net loss data assuming 1-2-3.tv was acquired at the beginning of fiscal 2021:
(a) The above proforma information is presented for the 1-2-3.tv acquisition as it is considered a material acquisition.
Synacor’s Portal and Advertising Business
On July 30, 2021, the Company closed on the acquisition of Synacor’s Portal and Advertising business segment. This acquisition allows the Company to leverage its interactive video expertise and national television promotional power, as well as its merchandising, customer solutions and fulfillment capabilities, to offer advertisers and consumer brands differentiated digital services that the Company believes will accelerate its timeline to become the leading single-source partner to advertisers seeking to use interactive video to drive growth. Synacor’s Portal and Advertising, which iMedia has combined with its business Float Left, has been renamed to iMDS. iMDS is a leading video advertising platform monetizing 200+ million monthly users for its publishers by utilizing its proprietary technologies, first-party customer shopping data and interactive video services to drive engagement, traffic and conversion.
The acquisition of the Portal and Advertising business was accounted for in accordance with ASC 805-10 “Business Combinations”. The total consideration transferred on the date of the transaction consisted of $20,000 cash, the issuance of a $10,000 seller notes and
assumed liabilities with a fair value of $7,864. The seller note is payable in $1,000 quarterly installments over the next ten calendar quarters beginning with September 30, 2021. The seller notes bear interest at rates between 6% and 11% depending upon the period outstanding. The allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions of the net assets acquired.
Based on the valuation, the total consideration of $30,400 has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows:
Goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed in the amount of $23,806, which was primarily related to the acquisition of customer relationships, technology platforms, and goodwill.
Christopher & Banks
C&B is a specialty brand of privately branded women's apparel and accessories. The C&B brand was previously owned by Christopher & Banks Corporation, which filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in January 2021. On March 1, 2021, the Company entered into a licensing agreement with ReStore Capital, a Hilco Global company, whereby the Company will operate the C&B business throughout all sales channels, including digital, television, catalog, and brick and mortar retail, effective March 1, 2021. The Company also purchased certain assets related to the C&B eCommerce business, including primarily inventory, furniture, equipment, and certain intangible assets. The Company launched a new weekly C&B television program on its ShopHQ network, which will also promote the brand’s website, christopherandbanks.com, its five retail store locations and its planned launch of C&B Stylists, an online interactive video platform that customizes wardrobe that is outfitted for customers by a C&B stylist.
On March 1, 2021, the Company acquired all the assets of Christopher & Banks, LLC. The acquisition of Christopher & Banks, LLC was accounted for in accordance with ASC 805-10 “Business Combinations”. The total consideration transferred on the date of the transaction consisted of $3,500 cash and assumed liabilities with a fair value of $4,197. In addition, the Company is obligated to issue common shares to Hilco with a value of $1,500 as additional consideration. The Company issued these shares during the third quarter of fiscal 2022.
The final total consideration of $5,000 has been allocated to assets acquired and liabilities assumed based on their respective fair values as follows:
Goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed in the amount of $3,307, which was primarily related to the acquisition of the product designs and customer list.
Non-controlling interests (“NCI”) represent equity interests owned by outside parties. NCI may be initially measured at fair value or at the NCI’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement is made on a transaction-by-transaction basis. iMedia elected to measure each NCI at its proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The share of net assets attributable to NCI are presented as a component of equity. Their share of net income or loss and comprehensive income or loss is recognized directly in equity. Total comprehensive income or loss of subsidiaries is attributed to the shareholders of the Company and to the NCI, even if this results in the NCI having a deficit balance. Due to the divestiture, the Company no longer has NCI.
In June 2022, the Company completed the divestiture of its 51% owned subsidiary, TCO, LLC (“TCO”). The Company received consideration of $3,505 in inventory and recorded a loss on divestiture of $985. The results of operations from TCO were not considered to be significant to the Company.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef