MERGER OF BRAZILIAN BUSINESS |
9 Months Ended |
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Sep. 30, 2011 | |
| MERGER OF BRAZILIAN BUSINESS |
2. MERGER OF BRAZILIAN BUSINESS
On
May 31, 2011, we completed the merger of our Brazilian business
with Boa Vista Serviços S.A. (“BVS”) in exchange
for a 15% equity interest in BVS, which was accounted for as a sale
and deconsolidated (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 130 million Brazilian Reais ($70.6 million and $82.3
million at September 30, 2011 and May 31, 2011, respectively) is
recorded in Other assets, net on the Consolidated Balance Sheets
and is accounted for using the cost method. The initial
fair value was determined by a third-party using income and market
approaches and would not have changed materially as of September
30, 2011. 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 Brazilian
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 Brazilian
Transaction.
Equifax
has committed to make certain additional funding available to
BVS. Until May 31, 2015, BVS will have the right to borrow up
to $55 million from Equifax for general corporate purposes; any
borrowings would be due and payable on May 31, 2015. 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 any
borrowings will be convertible to common shares under specific
conditions.
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