Business combinations

12 Months Ended

Dec. 31, 2019

Business combinations

Business combinations

5.  BUSINESS COMBINATIONS

On October 5, 2017, the Company completed the acquisition of DigitalGlobe, Inc. (“DigitalGlobe”) for a combination of equity and cash consideration totaling $2,328 million (the “DigitalGlobe Transaction”). Headquartered in Westminster, Colorado, DigitalGlobe is a global leading provider of high-resolution Earth imagery, data and analysis. Under the terms of the merger agreement with DigitalGlobe, each DigitalGlobe common share was exchanged for $17.50 in cash and 0.3132 common shares of the Company.

The fair value of the common shares issued as consideration was based on the closing price of a Maxar share on the Toronto Stock Exchange on October 4, 2017 of $54.57 per share. Share issuance costs of $3 million which were directly attributable to the issue of the shares have been netted against equity.

In order to finance the acquisition, the Company entered into a $3.8 billion senior secured syndicated credit facility (the “Syndicated Credit Facility”). On October 5, 2017, the Company made an initial draw under the Syndicated Credit Facility of $3.1 billion, net of debt issuance costs of $63 million, and used this amount, along with DigitalGlobe cash on hand, to acquire DigitalGlobe’s equity and pay out DigitalGlobe’s equity award holders ($1.2 billion), to refinance DigitalGlobe’s debt ($1.3 billion), to refinance the Company’s debt ($742 million) and to pay transaction fees and expenses of both the Company and DigitalGlobe, fund working capital and for general corporate purposes.

As part of the merger agreement, DigitalGlobe’s stock-based awards were converted into the right to receive a combination of cash and common shares of the Company, except for the stock component of certain unvested time-based awards that were replaced by equivalent stock-based awards of the Company. The fair value of the replacement awards attributable to the pre-acquisition and post-acquisition service periods were $16 million and $14 million, respectively. The pre-acquisition amount has been included as part of the purchase consideration and the post-acquisition amount will be expensed over the remaining vesting period of the replacement awards.

In addition, certain unvested performance-based DigitalGlobe stock-based awards and the cash component of the unvested time-based awards became fully vested and were paid the merger consideration on the closing of the transaction. Since this accelerated vesting was triggered by the actions of the Company, the component of the fair value of the consideration attributable to the accelerated stock-based awards relating to post acquisition services of $33 million has been recognized in the Company’s Consolidated Statements of Operations. The component relating to pre-acquisition services has been included as part of the purchase consideration.

The merger consideration paid out on the closing of the transaction excluded amounts due to 80,000 dissenting DigitalGlobe preferred stockholders and 352,225 dissenting common stockholders. On June 15, 2018, the Company entered into an agreement to settle all pending litigation with the preferred stockholders (the “Settlement Agreement”). Under the Settlement Agreement, the preferred stockholders received (i) 2,206,464 common shares of Maxar and (ii) a payment in cash for the interest that has accrued on the merger consideration from the closing of the DigitalGlobe Transaction. In January 2019, the Company settled with the remaining dissenting common stockholders.

In the period from October 5, 2017 to December 31, 2017, DigitalGlobe contributed revenue of $222 million and income before taxes of $8 million to the Company’s consolidated results of operations. Assuming an acquisition date of January 1, 2017, the Company’s unaudited pro-forma revenue for the year ended December 31, 2017 was $2.3 billion.

The following table summarizes the fair value of the consideration transferred and the estimated fair values of the major classes of assets acquired and liabilities assumed at the acquisition date. The fair value of satellite assets and intangible assets acquired has been determined using valuation techniques that require estimation of replacement costs, future net cash flows and discount rates.

	October 5, 2017
Cash paid	$	1,131
Shares issued		1,063
Merger consideration to be settled		3
Liability to dissenting stockholders		115
Issuance of replacement equity-settled awards		16
Purchase consideration	$	2,328
Assets
Cash and cash equivalents	$	171
Trade and other receivables, net		142
Property, plant and equipment, net		696
Intangible assets, net		1,440
Other assets		106
	$	2,555
Liabilities
Accounts payable		83
Other current liabilities		4
Pension and other postretirement benefit liabilities		29
Long-term debt		1,276
Other non-current liabilities		504
	$	1,896
Fair value of net identifiable assets acquired		659
Goodwill	$	1,669

The following table summarizes the intangible assets acquired from the DigitalGlobe Transaction by class and useful life:

	Carrying value		Weighted average useful life
Finite-lived intangible assets:
Customer relationships	$	608		14 years
Backlog		331		4 years
Technologies		318		5 years
Software		46		3 years
Image library		80		5 years
Trade names and trademarks		37		10 years
Other		20		2 years
Total intangible assets	$	1,440

The goodwill is attributable mainly to the human capital of DigitalGlobe’s workforce, market presence and the synergies expected to be achieved from integrating DigitalGlobe with the Company’s existing capabilities. No goodwill is deductible for income tax purposes.

During the year ended December 31, 2017, the Company incurred costs of $60 million for investment banking fees, legal, tax, consulting and other acquisition and integration costs related to the DigitalGlobe Transaction. These costs have been recognized in Selling, general, and administrative expense in the Company’s Consolidated Statements of Operations and in operating cash flows in the Consolidated Statements of Cash Flows.