4. ACQUISITIONS

On July 1, 2015 (the “Acquisition Date”), we acquired, through a wholly-owned subsidiary, 100.0 percent of the outstanding shares of N-Vision B.V., a Dutch limited liability company (“N-Vision”) that held a majority interest in TVN, for approximately €1,440.0 million, or $1,608.6 million, comprised of cash consideration of €584.0 million, or $652.4 million, and principal amounts of debt assumed of €856.0 million, or $956.2 million, including €556.0 million, or $621.1 million, of debt directly attributed to TVN (the “Acquisition”). The Acquisition was funded with a portion of the net proceeds from the $1,500.0 million debt offering executed in June 2015 (the “Financing”) (see Note 13 – Debt). The majority of the remaining debt proceeds were used to purchase the remaining outstanding shares of TVN through a tender offer for approximately $831.5 million (the “Tender Offer”) and a subsequent squeeze-out for approximately $22.4 million (the “Squeeze-out), which were both completed during the third quarter of 2015. Together, the Acquisition, Tender Offer and Squeeze-out are referred to herein as the Transactions (the “Transactions”). Total consideration for the Transactions was approximately $2,462.5 million.

The primary purpose of the Acquisition was to obtain N-Vision’s 52.7 percent controlling interest in the voting shares of TVN, a public media company listed on the Warsaw Stock Exchange (the “WSE”). The assets held by TVN are considered complementary to our existing business and align with our international growth strategy.

To minimize the volatility in the purchase price that may have resulted from Euro to U.S. Dollar currency exchange rate changes, we entered into a foreign currency option contract during the first quarter of 2015 that effectively set the U.S. Dollar cash consideration for the Acquisition. We paid a $16.0 million premium to provide the Company a call option on €584 million at a cost of $625.0 million. The premium is reflected both as an expense in gain (loss) on derivatives within operating activities and as a cash outflow from foreign currency call option premium within investing activities in our consolidated statements of cash flows for the year ended December 31, 2015. The foreign currency option contract was settled during the second quarter of 2015, and the $31.9 million resulting gain is included both as a gain in gain (loss) on derivatives within operating activities and a cash inflow from settlement on derivatives within investing activities in our consolidated statements of cash flows for the year ended December 31, 2015.

The net impact of the various foreign currency contracts executed as a result of the Transactions resulted in a $44.2 million net gain for the year ended December 31, 2015, which is included within gain (loss) on derivatives in our consolidated statements of operations.

We also recognized $24.2 million of net losses for the year ended December 31, 2015 related to the foreign currency effects on cash balances held for the Transactions. These losses are included within miscellaneous, net in our consolidated statements of operations.

Within three months of completing the Acquisition, the Company was required under Polish law to launch a mandatory public tender offer for a minimum ownership of 66.0 percent of TVN’s total voting shares outstanding. On June 9, 2015 the Company announced its intention to tender for all remaining outstanding voting shares of TVN to achieve 100.0 percent ownership. On July 6, 2015, the Company tendered for the remaining outstanding voting shares of TVN at a purchase price equal to 20.0 Zloty per share. Final cash consideration paid was approximately $853.9 million. The window to tender shares opened July 24, 2015 and continued through August 24, 2015, resulting in the acquisition of an additional 156.7 million shares, or a cumulative 98.8 percent ownership of TVN’s outstanding share capital. This enabled the Company to effectuate the Squeeze-out for the remaining unredeemed shares, which was completed on September 28, 2015 and resulted in 100.0 percent ownership of TVN. As part of the integration of TVN, the Company, through TVN, filed the documentation required under Polish law to effect the delisting of TVN shares from the WSE, which became effective December 3, 2015.

The incremental shares purchased through the Tender Offer and Squeeze-out were financed through a combination of cash on hand, borrowings under our $900.0 million amended revolving credit facility (the “Amended Revolving Credit Facility”) and net proceeds from our $250.0 million term loan (the “Term Loan”) (see Note 13 – Debt). The initial 52.7 percent acquisition is reflected within investing activities in our consolidated statements of cash flows, while the subsequent Tender Offer and Squeeze-out are recognized within financing activities as a purchase of non-controlling interest.

We incurred transaction and integration related costs of $28.3 million associated with the Acquisition. These transaction and integration costs are included within selling, general and administrative expenses in our consolidated statements of operations and reduced net income attributable to SNI by $17.4 million.

On July 31, 2015, the Company paid €364.9 million to retire the €300.0 million Senior PIK Toggle Notes due 2021 (“the 2021 PIK Notes”), which was debt at the parent of TVN and included as a component of the debt assumed in the Acquisition purchase price. The payment included the aggregate principal and a required make-whole component totaling €363.4 million, as well as accrued and unpaid interest of €1.5 million. The extinguishment of debt, including the make-whole component, is reflected as a financing activity in our consolidated statements of cash flows.

On September 15, 2015, TVN executed a partial pre-payment of its 7.38% Senior Notes due 2020 (the “2020 TVN Notes”) totaling €45.1 million, comprised of principal of €43.0 million, accrued but unpaid interest of €0.8 million and premium of €1.3 million. Under the terms of the 2020 TVN Notes, TVN has the right to make a payment of 10.0 percent of the original principal amount in each rolling twelve month period prior to December 31, 2016 without an early pre-payment penalty.

On November 16, 2015, TVN Finance Corporation III AB (“TVN Finance Corp.”), an indirect wholly-owned subsidiary of the Company, executed a second partial pre-payment of the 2020 TVN Notes totaling €45.6 million, comprised of principal of €43.0 million, accrued but unpaid interest of €1.3 million and premium of €1.3 million.

On November 16, 2015, TVN Finance Corp. executed a full early redemption of its 7.88% Senior Notes due 2018 (the “2018 TVN Notes”) totaling €118.9 million, comprised of principal of €116.6 million, accrued but unpaid interest of a nominal amount and premium of €2.3 million. An additional €4.6 million was paid simultaneously in fulfillment of the November 15 coupon payment due. The extinguishment of debt is reflected as a financing activity in our consolidated statements of cash flows.

The Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, that we allocate the purchase price to the assets acquired and liabilities assumed based on their fair values as of the Acquisition Date. We have reported the results of operations for TVN for the period beginning on the Acquisition Date and ended on December 31, 2015 in our consolidated financial statements.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date. Certain estimated values for the Acquisition, including goodwill, investments, intangibles and deferred taxes are not yet finalized. Therefore, the preliminary purchase price allocations are subject to change as we complete our analysis of the fair value at the Acquisition Date. The purchase price was allocated based on information available at the Acquisition Date.

(in thousands)
Balance Sheet Classification	Fair Value
Cash consideration transferred	$	652,365
Recognized amounts of identifiable assets acquired and liabilities assumed:
Assets acquired:
Cash and cash equivalents		105,714
Restricted cash		7,342
Accounts receivable		110,387
Other current assets		21,592
Property and equipment		92,133
Programs and program licenses		79,211
Other intangible assets		760,636
Investments		354,719
Liabilities assumed:		—
Accounts payable		(28,941	)
Program rights payable (current portion)		(19,395	)
Deferred revenue		(2,132	)
Employee compensation and benefits		(27,896	)
Accrued marketing and advertising		(543	)
Other accrued liabilities		(64,224	)
Deferred income taxes		(43,530	)
7.88% 2018 Senior Notes		(128,577	)
7.38% 2020 Senior Notes		(528,205	)
11.00%/12.00% 2021 PIK Toggle Notes		(409,549	)
Term Loan		(18,178	)
Program rights payable (less current portion)		(3,492	)
Other liabilities (less current portion)		(5,624	)
Non-controlling interest		(858,530	)
Goodwill		1,259,447
Net Assets Acquired	$	652,365

The following table represents the preliminary fair value of identifiable intangible assets and their assumed estimated useful lives.


(in thousands) Intangible Asset Category	Type	Weighted Average Life in Years		Fair Value
Copyrights and other tradenames	Amortizable	23		$	333,912
Broadcast licenses	Amortizable		25		128,017
Customer lists	Amortizable		15		26,670
Advertiser lists	Amortizable		7		106,681
Acquired rights and other	Amortizable		20		165,356
				$	760,636

As a result of the Acquisition, we preliminarily recognized goodwill of $1,259.4 million. The purchase price was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the Acquisition Date, and the excess was allocated to goodwill, as shown in the table above. Goodwill represents the value we expect to achieve through the Acquisition and is recorded in the International Networks segment. The fair value of this goodwill is not deductible for U.S. income tax purposes.

We utilized various valuation techniques to determine fair value, primarily discounted cash flow analyses and excess earnings valuation approaches, each of which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy (see Note 6 – Fair Value Measurement). Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flow and marketplace data.

The following unaudited pro forma information presents the combined results of operations as if the Transactions had occurred at the beginning of fiscal year 2014, with TVN’s pre-acquisition results combined with our historical results. The pro forma results contained in the following table include adjustments for amortization of acquired intangibles, depreciation expense, transaction costs, interest expense as a result of the Financing and related income taxes. Any potential cost savings or other operational efficiencies that could result from the Transactions are not included in these pro forma results. These pro forma results do not necessarily reflect what would have occurred if the Acquisition had taken place January 1, 2014, nor do they represent the results that may occur in the future.

	For the years ended
(in thousands)	December 31,
Pro Forma Results (unaudited)	2015		2014
Pro Forma Revenues	$	3,236,344	$	3,166,652
Pro forma net income attributable to SNI	$	584,618	$	499,767
Pro forma net income attributable to SNI per basic share of common stock	$	4.51	$	3.54
Pro forma net income attributable to SNI per diluted share of common stock	$	4.49	$	3.51
Weighted average basic shares outstanding		129,665		141,297
Weighted average diluted shares outstanding		130,255		142,193

We did not recognize any contingent consideration arising from the Acquisition.

TVN contributed operating revenues of $224.7 million and operating income of $36.7 million for 2015 from the Acquisition Date through December 31, 2015.