Acquisitions and Other Investments

For our acquisition of HomeAway in December 2015, the purchase price allocation remains preliminary and subject to revision while we accumulate all relevant information regarding the fair values of the net assets acquired. The final allocation may include changes to the acquisition date fair value of goodwill and deferred taxes as well as operating assets and liabilities. During the first nine months of 2016, there were no adjustments made to the HomeAway purchase price allocation that materially impacted the consolidated balance sheet or current period earnings.

Orbitz Acquisition. On September 17, 2015, we completed our acquisition of Orbitz Worldwide, Inc., including all of its brands, including Orbitz, ebookers, HotelClub, CheapTickets, Orbitz Partner Network and Orbitz for Business, for a total purchase consideration of $1.8 billion. The acquisition provides Expedia the opportunity to deliver a better customer experience to Orbitz’s loyal customer base and to further enhance the marketing and distribution capabilities we offer to our global supply partners.

The purchase consideration consisted primarily of $1.4 billion in cash, or $12 per share for all shares of Orbitz common stock outstanding as of the purchase date, as well as the settlement of $432 million of pre-existing Orbitz debt at the closing of the acquisition. Purchase consideration also included $17 million for the portion of certain unvested employee restricted stock unit awards of Orbitz attributable to pre-combination services, which were replaced with Expedia awards in conjunction with the acquisition and measured at fair value on the acquisition date. The fair value for the portion of these awards, attributable to post combination services was $49 million, net of estimated forfeitures, of which $34 million was recognized during 2015.

The following summarizes the allocation of the final purchase price for Orbitz, in thousands:



Cash consideration for shares	$	1,362,362
Repayment of Orbitz debt	432,231
Replacement restricted stock units attributable to pre-acquisition service	16,717
Other consideration	2,214
Total purchase consideration	$	1,813,524



Cash	$	194,515
Accounts receivable, net⁽¹⁾	150,187
Other current assets	33,727
Long-term assets	114,800
Intangible assets with definite lives⁽²⁾	515,003
Intangible assets with indefinite lives⁽³⁾	166,800
Goodwill	1,454,335
Current liabilities	(636,169		)
Other long-term liabilities	(54,599		)
Deferred tax liabilities, net	(125,075		)
Total	$	1,813,524


(1)	Gross accounts receivable was $157 million, of which $7 million was estimated to be uncollectible.


(2)	Acquired definite-lived intangible assets primarily consist of customer relationship assets, developed technology assets and partner relationship assets with estimated useful lives ranging from less than one to ten years with a weighted average life of 6.03 years.


(3)	Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.

The allocation of the purchase price to goodwill was completed during the third quarter of 2016 with no material adjustments to our preliminary allocation. The goodwill of $1.5 billion was primarily attributable to operating synergies. The goodwill was allocated to the Core Online Travel Agencies ("Core OTA") segment and not expected to be deductible for tax purposes.

Orbitz was consolidated into our financial statements starting on the acquisition date and we recognized a related $19 million in revenue and $86 million in operating losses for the three and nine months ended September 30, 2015. Supplemental information on an unaudited pro forma basis, as if the Orbitz acquisition had been consummated on January 1, 2015, is presented as follows, in thousands:



	Nine months ended September 30, 2015
Revenue	$	5,643,060
Net income attributable to Expedia, Inc.	848,342

The pro forma results include adjustments primarily related to amortization of acquired intangibles, depreciation of fixed assets, certain accounting policy alignments as well as direct and incremental acquisition related costs reflected in the historical financial statements.

In connection with the merger, Orbitz incurred fees paid to financial advisors totaling approximately $25 million, which were contingent upon closing and were excluded from both Expedia’s consolidated statement of operations and the pre-combination financial statements of Orbitz. In addition, Orbitz offered certain employees a continuity incentive of approximately $30 million for continuing employment through the closing date and beyond. The first half of the incentives were contingent and paid upon the closing of the acquisition and related to services provided in the pre-acquisition period. The second half of the incentive was payable 180 days after the closing (or upon involuntary termination, if applicable) and was expensed to restructuring and related reorganization charges over the applicable service period.

Other than costs mentioned above that were contingent upon closing, acquisition-related costs incurred by Expedia, which included legal, finance, consulting and other professional fees, were expensed as incurred within general and administrative expenses and were approximately $6 million and $16 million for the three and nine months ended September 30, 2015.

Other 2015 Acquisitions. The following summarizes the allocation of the purchase price for other acquisitions during the nine months ended September 30, 2015, including Travelocity and a controlling interest in our former 50/50 joint venture with AirAsia Berhad, in thousands:



Goodwill	$	196,431
Intangible assets with indefinite lives	163,400
Intangible assets with definite lives⁽¹⁾	146,126
Net assets and non-controlling interests acquired⁽²⁾	(23,366		)
Deferred tax liabilities, net	(7,910		)
Total⁽³⁾	$	474,681


(1)	Acquired definite-lived intangible assets primarily consist of customer relationship, reacquired right and supplier relationship assets and have estimated useful lives of between four and ten years with a weighted average life of 5.8 years.


(2)	Includes cash acquired of $41 million.


(3)	The total purchase price includes noncash consideration of $99 million related to an equity method investment, which was consolidated upon our acquisition of a controlling interest, with the remainder paid in cash during the period.

Other Investments. On March 10, 2015, we announced that Expedia and Decolar.com, Inc. (“Decolar”), the Latin American online travel company that operates the Decolar.com and Despegar.com branded websites, have expanded our partnership to include deeper cooperation on hotel supply and a $270 million cost method investment by Expedia in Decolar, which is included within long-term investments and other assets on our consolidated balance sheet.