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MERGER OF BRAZILIAN BUSINESS
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6 Months Ended |
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Jun. 30, 2011
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| MERGER OF BRAZILIAN BUSINESS |
2. MERGER OF BRAZILIAN BUSINESS
On
May 31, 2011 (the "Closing Date"), Equifax completed the merger of
our Brazilian business with Boa Vista Servicos S.A.
(“BVS”) in exchange for a 15% equity interest in BVS,
which was accounted for as a sale (“the Brazilian
Transaction”). BVS, an unrelated third party
whose results we do not consolidate, is the second largest consumer
and commercial credit information company in Brazil. Our
investment in BVS was valued at $82.3 million (130 million in
Brazilian real), was recorded in other assets, net on the
Consolidated Balance Sheets and will be accounted for using the
cost method. The initial fair value was determined by a
third-party using income and market approaches. In accounting
for the transaction, we wrote off $33.2 million of goodwill and
$27.0 million of cumulative foreign currency translation
adjustments. In addition, as part of the agreement with BVS,
we have retained certain contingent liabilities. A pre-tax
loss of $10.3 million was recognized during the second quarter of
2011 related to the transaction and is included in other expense in
the Consolidated Statement of Income. Tax expense of $17.5
million was also recorded in conjunction with the
transaction.
Equifax
has committed to make certain additional funding available to
BVS. BVS has the right for a 90 day period from the Closing
Date to require Equifax Brazil to contribute up to $100 million to
BVS (the “Cash Contributions”) to fund one or more
mutually agreed upon strategic acquisitions in exchange for shares
of BVS non-voting preferred stock. After the expiration of the
initial 90-day period, and until two years from the Closing Date,
BVS will have the right to obtain additional funding from Equifax,
in $5 million increments, for general corporate purposes, in an
amount up to the lesser of $100 million minus any Cash
Contributions or $55 million. Any borrowings would be due
four years from the Closing Date. Payments for principal and
interest on any borrowings will be convertible, at Equifax’s
option, into additional shares of BVS nonvoting preferred
stock. Preferred shares issued as a result of the Cash
Contributions or any borrowings will be convertible to common
shares under specific conditions.
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