4. ACQUISITIONS

Completed Acquisitions

Vibrant Energy

On April 7, 2016, the Company completed its acquisition of a solar power development portfolio in India from Armstrong Energy Global Limited (“Armstrong”), a well-known developer, builder, and owner of solar farms (the “Vibrant Energy Acquisition”). The business operates under the name Vibrant Energy. The Company also retained several Armstrong employees in the UK and India who are employed by the Company to oversee the development, construction and operation of the India solar projects. The projects to be developed initially are located in the states of Andhra Pradesh and Telangana and are based on a commercial and industrial business model, similar to the Company’s existing renewable energy operations in the United States. As of April 7, 2016, the Company began consolidating the results of Vibrant Energy in its financial statements within its Renewable Energy segment.

The Vibrant Energy Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations (“ASC 805”). The total purchase consideration of $6.2 million cash was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition. The table below represents the preliminary allocation of the consideration transferred to the net assets of Vibrant Energy based on their acquisition date fair values (in thousands):


Consideration Transferred	$ 6,193


Preliminary Purchase price allocation:
Cash	$ 136
Prepayments and other assets	636
Property, plant and equipment	7,321
Accounts payable and accrued liabilities	(5,179)
Goodwill	3,279
Net assets acquired	6,193

The consideration transferred includes $3.5 million paid and $2.7 million to be paid, which relates to the passage of time and achievement of initial production milestones which are considered probable. The acquired property, plant and equipment is comprise of solar equipment and the accounts payable and accrued liabilities consists mainly of amounts payable for certain asset purchases. The fair value of the property, plant, and equipment was based on recent acquisition costs for the assets, given their recent purchase dates from third parties. The goodwill in the transaction relates to the assembled workforce of the business acquired.

For the six months ended June 30, 2016 the Vibrant Energy Acquisition accounted for $0.1 million of the Company’s revenue. The Company incurred $10.2 million of transaction related charges pertaining to legal, accounting and consulting services associated with the transaction, of which $9.0 million were incurred during the six months ended June 30, 2016. The pro forma financial information assuming the acquisition had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the current year, were not material for disclosure purposes.

KeyTech Limited

On May 3, 2016, the Company completed its acquisition of a controlling interest in KeyTech Limited (“KeyTech”), a publicly held Bermuda company listed on the Bermuda Stock Exchange (“BSX”) that provides broadband and cable television services and other telecommunications services to residential and enterprise customers under the “Logic” name in Bermuda and the Cayman Islands (the “KeyTech Transaction”). KeyTech also owned a minority interest of approximately 43% in the Company’s consolidated subsidiary, Bermuda Digital Communications Ltd. (“BDC”), which provides wireless services in Bermuda under the “CellOne” name. As part of the transaction, the Company contributed its ownership interest of approximately 43% in BDC and $41.6 million in cash in exchange for a 51% ownership interest in KeyTech. As part of the transaction, BDC was merged with and into a company within the KeyTech group and the approximate 15% interest in BDC held, in the aggregate, by BDC’s minority shareholders was converted into the right to receive common shares in KeyTech. Following the transaction, BDC is now wholly owned by KeyTech, and KeyTech continues to be listed on the BSX. A portion of the cash proceeds that KeyTech received upon closing was used to fund a one-time special dividend to KeyTech's pre-transaction shareholders and to retire KeyTech’ s subordinated debt. On May 3, 2016, the Company began consolidating the results of KeyTech within its financial statements in its International Telecom segment.

The KeyTech Transaction was accounted for as a business combination of a controlling interest in KeyTech in accordance with ASC 805 and the acquisition of an incremental ownership interest in BDC in accordance with ASC 810, Consolidation. The total purchase consideration of $41.6 million of cash was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition. The table below represents the preliminary allocation of the consideration transferred to the net assets of KeyTech and incremental interest acquired in BDC based on their acquisition date fair values (in thousands):


Consideration Transferred
Cash consideration - KeyTech	$ 34,518
Cash consideration - BDC	7,045
Total consideration transferred	41,563
Non-controlling interests - KeyTech	32,909
Total value to allocate	$ 74,472
Value to allocate KeyTech	67,427
Value to allocate - BDC	7,045

Preliminary Purchase price allocation KeyTech:
Cash	8,185
Accounts receivable	6,451
Other current assets	3,241
Property, plant and equipment	100,892
Identifiable intangible assets	10,590
Other long term assets	3,464
Accounts payable and accrued liabilities	(16,051)
Advance payments and deposits	(6,683)
Current debt	(6,429)
Long term debt	(28,929)
Net assets acquired	74,731

Gain on KeyTech bargain purchase	$ 7,304

Purchase price allocation BDC:
Carrying value of BDC non-controlling interest acquired	2,940

Excess of purchase price paid over carrying value of non-controlling interest acquired	$ 4,105

The acquired property, plant and equipment is comprised of telecommunication equipment located in Bermuda and the Cayman Islands. The property, plant and equipment was valued using the income and cost approaches. Cash flows were discounted at approximately 15% rate to determine fair value under the income approach. The property, plant and equipment have useful lives ranging from 3 to 18 years and the customer relationships acquired have average useful lives of 9 to 12 years. The fair value of the non-controlling interest was determined using the income approach and a discount rate of approximately 15%. The acquired receivables consist of trade receivables incurred in the ordinary course of business. The Company currently expects to collect the full amount of the receivables.

The purchase price and resulting bargain purchase gain are the result of the market conditions and competitive environment in which KeyTech operates along with the Company's strategic position and resources in those same markets. Both companies realized that their combined resources would accelerate the transformation of both companies to better serve customers in these markets. The bargain purchase gain is included in operating income in the accompanying income statement for the three and six months ended June 30, 2016.

The Company’s statement of operations for the six months ended June 30, 2016 includes $14.0 million of revenue and $3.0 million of income before taxes attributable to the KeyTech Transaction. The Company incurred $4.1 million of transaction related charges pertaining to legal, accounting and consulting services associated with the transaction, of which $3.2 million were incurred during the six months ended June 30, 2016.

The following table reflects unaudited pro forma operating results of the Company for the three and six month periods ended June 30, 2016 and June 30, 2015 assuming that the KeyTech Transaction occurred at the beginning of each period presented. The pro forma amounts adjust KeyTech’s results to reflect the depreciation and amortization that would have been recorded assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from January 1, 2015. Also, KeyTech’s results are adjusted to reflect the retirement of $24.7 million of debt as of January 1, 2015. ATN’s results were adjusted to reflect ATN’s incremental ownership in BDC. Amounts are presented in thousands, except per share data:


		Three months ended				Three months ended				Six months ended				Six months ended
		June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
		As		As		As		As		As		As		As		As
		Reported		Adjusted		Reported		Adjusted		Reported		Adjusted		Reported		Adjusted
Revenue	$	99,991	$	107,006	$	90,326	$	112,181	$	189,676	$	231,757	$	175,670	$	218,510
Net Income attributable to ATN International, Inc. Stockholders		(3,086)		(1,157)		9,450		9,746		3,034		9,935		6,181		25,673
Earnings per share:
Basic		(0.19)		(0.07)		0.59		0.61		0.19		0.62		0.38		1.61
Diluted		(0.19)		(0.07)		0.59		0.60		0.19		0.61		0.38		1.59

Acquisition Completed Subsequent to Quarter End

Innovative

On July 1, 2016, the Company completed its acquisition of all of the membership interests of Caribbean Asset Holdings LLC, the holding company for the Innovative group of companies operating cable television, Internet, wireless and landline services in the U.S. Virgin Islands, British Virgin Islands and St. Maarten (“Innovative”), from the National Rural Utilities Cooperative Finance Corporation (“CFC”). The Company acquired the Innovative operations for a purchase price of approximately $145 million, subject to certain purchase price adjustments (the “Innovative Transaction”). In connection with the transaction, the Company financed $60 million of the purchase price with a loan from an affiliate of CFC, the Rural Telephone Finance Cooperative (“RTFC”) on the terms and conditions of a Loan Agreement by and among RTFC, CAH and ATN VI Holdings, LLC, the parent entity of CAH and a wholly-owned subsidiary of the Company. The Company funded the remaining approximately $85.0 million of the purchase price in cash. Following the purchase, the Company’s current operations in the U.S. Virgin Islands under the “Choice” name will be combined with Innovative to deliver residential and business subscribers a full range of telecommunications and media services.

Beginning July 1, 2016, the results of the Innovative Transaction will be included in the Company’s International Telecom segment.