Redeemable Non-Controlling Interest

3 Months Ended

Mar. 31, 2020



13.	Redeemable Non-Controlling Interest

On March 5, 2019, the Company acquired Discovery Benefits, an employee benefits administrator. The seller of Discovery Benefits obtained a 4.9 percent equity interest in the newly formed parent company of WEX Health and Discovery Benefits (the “U.S. Health business”). The seller’s 4.9 percent non-controlling interest in the U.S. Health business was initially established at both carrying value and fair value. On the date of acquisition, the excess of the fair value of the 4.9 percent equity interest in WEX

Health over its carrying value was recognized as an equity transaction, resulting in a $41.4 million increase to additional paid-in capital.

The agreement provides the seller with a put right and the Company with a call right for the equity interest, which can be exercised no earlier than seven years following the date of acquisition. Upon exercise of the put or call right, the purchase price is calculated based on a revenue multiple of peer companies (as described in the operating agreement for the U.S. Health business) applied to trailing twelve month revenues of the U.S. Health business. The put option makes the non-controlling interest redeemable and, therefore, the non-controlling interest is classified as temporary equity outside of stockholders’ equity. The redeemable non-controlling interest is reported at the higher of its redemption value or the non-controlling interest holder’s proportionate share of the U.S. Health business’ net carrying value.

Subsequent remeasurement of the equity interest to fair value during the first quarter of 2019 resulted in an increase to redeemable non-controlling interest of $41.4 million and an offsetting decrease to retained earnings that did not impact earnings per share. During the three months ended March 31, 2020, the Company recalculated the redeemable non-controlling interest using revenue multiples as determined in accordance with the operating agreement for the U.S. Health business and described above, resulting in a $2.6 million increase to the redeemable non-controlling interest. The adjustment reduced both retained earnings and earnings per share attributable to shareholders for the three months ended March 31, 2020. Any subsequent increases or decreases in the redemption value of the non-controlling interest will be offset against retained earnings and impact earnings per share.

The following table presents the changes in the Company’s redeemable non-controlling interest:



	Three Months Ended March 31,
(In thousands)	2020		2019
Balance, beginning of period	$	156,879	$	—
Acquisition of Discovery Benefits at fair value	—		25,757
Establishing redeemable non-controlling interest for WEX Health at carrying value	—		32,843
Adjustment to redeemable non-controlling interest to reflect WEX Health at fair value	—		41,400
Net income (loss) attributable to redeemable non-controlling interest	142		(7		)
Accretion of non-controlling interest	2,624		—
Balance, end of period	$	159,645	$	99,993