Business combinations

12 Months Ended

Dec. 31, 2020

Business combinations

Business combinations

5.  BUSINESS COMBINATION

On July 1, 2020, the Company closed the acquisition of Vricon, Inc. (“Vricon”) by purchasing the remaining 50% ownership interest in Vricon (“Vricon Acquisition”) for $143 million, excluding Vricon cash on hand of $23 million, for $120 million, net of cash at closing. Vricon is a global leader in satellite-derived 3D data for defense and intelligence markets, with software and products that enhance 3D mapping, Earth intelligence data, military simulation and training and precision-guided munitions. Vricon was formed as a joint venture between Maxar and Saab AB in 2015 to combine patented Saab AB Intellectual Property with our commercial satellite imagery to build highly accurate, immersive 3D products at scale. Prior to the closing of the acquisition, Vricon was the Company’s most significant joint venture.

To fund the Vricon Acquisition, the Company issued $150 million in aggregate principal amount of new senior secured notes due 2027. See Note 12 for additional details on the issuance of the new senior secured notes.

As part of the acquisition agreement, Vricon’s stock-based awards vested at the time of acquisition were settled in cash for $26 million. The unvested awards were forfeited.

The Vricon Acquisition was achieved in stages, which required the Company to remeasure its previously held equity interest in Vricon at its acquisition date fair value. As no material control premium was determined to exist, the call option purchase price of $117 million paid in the Vricon Acquisition was used to estimate the fair value of the previously held equity interest. The Company performed a business enterprise valuation to corroborate the resulting total implied purchase consideration. This remeasurement resulted in a gain of approximately $85 million which is recorded in Other (income) expense within the Company’s Consolidated Statements of Operations for the year ended December 31, 2020.

The operating results of Vricon are included in the Company’s Consolidated Statements of Operations beginning July 1, 2020. Vricon results are consolidated within the Earth Intelligence Segment.

The following table presents unaudited pro forma financial information as if Vricon had been included in the Company’s financial results as of January 1, 2019, through year end:

	Year Ended
	December 31,
	2020		2019
Revenues	$	1,734	$	1,706
Net income	$	302	$	119

Preliminary Purchase Price Allocation

The following table summarizes the fair value of the consideration transferred and the preliminary estimated fair values of the major classes of assets acquired and liabilities assumed at the acquisition date. The fair value of the intangible assets acquired has been determined using valuation techniques that require significant judgement, including the amount and timing of future net cash flows and discount rates.

	July 1, 2020
Call option purchase price	$	117
Fair value of existing equity interest		117
Cash settlement of equity awards		26
Purchase consideration	$	260
Assets
Cash and cash equivalents	$	23
Trade and other receivables, net		9
Property, plant and equipment, net		3
Intangible assets, net		73
Other assets		7
Total assets	$	115
Liabilities
Accounts payable		1
Accrued liabilities		3
Deferred income tax liability		17
Other current liabilities		6
Total liabilities		27
Fair value of net identifiable assets acquired		88
Goodwill	$	172

The following table summarizes the intangible assets acquired from the Vricon Acquisition by class and useful life:

	Carrying value		Remaining useful life
Finite-lived intangible assets:
Backlog	$	21		2 years
Trademarks		1		1 year
Existing technology		49		9 years
Existing software		2		2 - 3 years
Total intangible assets	$	73

The goodwill of $172 million is attributable primarily to the synergies expected to be achieved from integrating Vricon with the Company’s existing capabilities. Due to the nature of the transaction, the Company will not receive a step-up in tax basis on the fixed assets, intangible assets or goodwill recorded in the purchase price allocation.