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Business Combinations
6 Months Ended
Jun. 30, 2020
Business Combinations  
Business Combinations

3. Business Combinations

Interxion Combination

We obtained control of Interxion on March 9, 2020 and completed the Interxion Combination on March 12, 2020 for total equity consideration of approximately $7.0 billion, including approximately $108.5 million of assumed cash and cash equivalents. The allocation of the purchase price was complete as of June 30, 2020. During the three months ended June 30, 2020, we made measurement period adjustments to provisional amounts with respect to the Interxion Combination that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The impact of the measurement period adjustments to the income statement from the combination date through March 31, 2020 was not material.

The following table summarizes the acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):

    

Provisional

Final

Amounts

Adjustments

Amounts

Land

$

310,310

$

(150,843)

$

159,467

Building and improvements

3,003,378

243,144

3,246,522

Construction in progress

311,702

(38,112)

273,590

Land held for development

33,447

33,447

Operating lease right-of-use assets

526,399

30,466

556,865

Cash and cash equivalents

 

108,548

 

 

108,548

Accounts receivables

218,868

218,868

Goodwill

 

4,192,504

 

251,352

 

4,443,856

Customer relationship value (1)

 

1,340,539

 

(338,971)

 

1,001,568

Other intangibles

44,943

44,943

Revolving credit facility

(128,282)

(2,045)

(130,327)

Mortgage loans

 

(74,316)

 

 

(74,316)

Unsecured debt

 

(1,434,666)

 

(22,969)

 

(1,457,635)

Accounts payable and other accrued liabilities

(230,585)

(230,585)

Finance lease obligations

(47,957)

(47,957)

Operating lease liabilities

 

(526,399)

 

(30,466)

 

(556,865)

Deferred tax liability, net

(559,291)

23,301

(535,990)

Other working capital liabilities, net

(68,947)

(68,947)

Total purchase price

$

6,975,252

$

9,800

$

6,985,052

(1)The weighted average amortization life for customer relationship value is 15 years.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired and tangible and intangible liabilities assumed in the acquisition. As shown above, we recorded approximately $4.4 billion of goodwill related to the Interxion Combination. The goodwill is not expected to be deductible for local tax purposes. The strategic benefits of the acquisition include the Company’s ability to continue its strategy to provide solutions on a global basis with a diversified product offering of data center solutions for both small and large footprint deployments as well as interconnection services. These factors contributed to the goodwill that was recorded upon consummation of the transaction.

The unaudited pro forma financial information set forth below is based on our historical condensed consolidated income statements for the three and six months ended June 30, 2020 and 2019, adjusted to give effect to the Interxion Combination as if it occurred on January 1, 2019. The pro forma adjustments primarily relate to merger expenses, depreciation expense on acquired buildings and improvements, amortization of acquired intangibles, and estimated interest expense related to financing transactions, the proceeds of which were used to fund the repayment of Interxion debt in connection with the Interxion Combination.

Pro forma (unaudited)

(in thousands)

Three Months Ended June 30, 

 

Six Months Ended June 30, 

Digital Realty Trust, Inc.

    

2020

    

2019

 

2020

    

2019

Total revenue

$

992,995

$

978,880

$

1,964,331

$

1,965,399

Net income available to common stockholders (1)

$

61,793

$

20,808

$

309,656

$

59,196

Pro forma (unaudited)

(in thousands)

Three Months Ended June 30, 

 

Six Months Ended June 30, 

Digital Realty Trust, L.P.

    

2020

    

2019

 

2020

    

2019

Total revenue

$

992,995

$

978,880

$

1,964,331

$

1,965,399

Net income available to common unitholders (1)

$

63,193

$

22,208

$

318,856

$

64,896

(1)Pro forma net income available to common stockholders/unitholders was adjusted to exclude $8.1 million and $60.5 million of merger-related costs incurred by the Company during the three and six months ended June 30, 2020, respectively, and to include these charges for the corresponding periods in 2019.

Revenues of approximately $194.5 million and $241.9 million and net income of approximately $9.4 million and $12.1 million associated with the Interxion Combination are included in the condensed consolidated income statement for the three and six months ended June 30, 2020, respectively.