v3.5.0.2

ACQUISITIONS | 6 Months Ended
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Jun. 30, 2016
ACQUISITIONS |
ACQUISITIONS | 6. ACQUISITIONS Effective as of the Transaction Date, Azure contributed the Legacy System to the Partnership in exchange for aggregate consideration of $162.5 million, which was paid to Azure in the form of: (i) $99.5 million in cash; and (ii) the issuance of 90 of our IDR Units. The cash portion of the contribution was funded through borrowings under the Partnership's Credit Agreement (see Note 8). The Legacy System has been deemed to be the accounting acquirer of the Partnership in the business combination because its parent company, Azure, obtained control of the Partnership through the indirect control of the General Partner. Consequently, the Legacy System’s assets and liabilities retained their historical carrying values. The Partnership's assets acquired and liabilities assumed by the Legacy System have been recorded at their fair values measured as of the Transaction Date. The excess of the assumed purchase price over the estimated fair values of the Partnership's net assets acquired were recorded as goodwill. The assumed purchase price and fair value of the Partnership has been determined by using a combination of an income, market and cost valuation methodology and considered the evaluation of comparable company transactions, the Partnership's discounted future cash flows, the fair value of the Partnership's common units as of the Transaction Date and the consideration paid by Azure for the general partner interest and IDR Units. The purchase price allocation has been prepared based on a valuation report prepared with the assistance of the Partnership’s fair value specialists and represents management’s best estimate of the enterprise and fair values of the Partnership. The property, plant and equipment of the Legacy System has been reflected at its historical net carrying value, which is greater than the consideration paid for the business. The excess of the historical carrying value over the consideration paid was $51.7 million and was reflected as an increase to partners' capital. Additionally, the Partnership did not assume certain liabilities of the Legacy System as part of the Contribution, and, as a result, the amount of such liabilities not assumed is considered a deemed contribution within the statement of partners' capital. The Partnership incurred $2.6 million in transaction related expenses prior to the Transaction Date as a result of the Transactions. These transaction related expenses were recognized by the Partnership when incurred in the periods prior to the Transaction Date, and therefore are not included within the results of operations presented within the condensed consolidated financial statements for the six months ended June 30, 2015. The following tables summarize the assumed purchase price, fair value and the allocation to the assets acquired and liabilities assumed as of February 28, 2015 (in thousands):
Total assumed purchase price and fair value of Azure Midstream Partners, LP |  | $ | 393,171 |
The allocation of the assumed purchase price is as follows (in thousands):
Assumed purchase price allocation to Azure Midstream Partners, LP: |  |  |
Current assets |  | $ | 123,022
Property, plant and equipment |  |  | 193,316
Identifiable intangible assets |  |  | 65,000
Goodwill |  |  | 215,758
Other assets |  |  | 3,418
Current liabilities |  |  | (11,161)
Long-term debt |  |  | (195,771)
Deferred income tax liability |  |  | (411)
Total assumed consideration and fair value of Azure Midstream Partners, LP |  | $ | 393,171
Goodwill recognized from the business combination primarily related to the value attributed to additional growth opportunities, synergies and operating leverage within the Partnership's areas of operation. Goodwill was allocated to our gathering and processing segment and our logistics segment. Goodwill was fully impaired in September 2015. The assumed purchase price and fair values have been prepared with the assistance of our external fair value specialists, and represent management's best estimate of the enterprise value and fair values of the Partnership as of this date. Contribution of the ETG System On August 6, 2015, in connection with the execution of the Contribution Agreement, Azure contributed the ETG System to the Partnership in consideration for $80.0 million in cash and the issuance of 255,319 common units. In connection with the Contribution Agreement, we entered into a Gas Gathering Agreement with TGG. The Contribution Agreement contains customary representations and warranties, indemnification obligations and covenants by the parties, and provides that the Partnership’s acquisition of the ETG System was effective on July 1, 2015. The contribution of the ETG System by Azure to the Partnership was determined to be a transaction between entities under common control for financial reporting purposes. Because the contribution of the ETG System is considered to be a transaction amongst entities under common control, the ETG System is reflected at Azure's historical cost and the difference between that historical cost and the purchase price is recorded as an adjustment to partners' capital. The assets acquired and liabilities assumed of the ETG System have been reflected at their historical net carrying value, which is less than the consideration paid for the business. The excess of the consideration paid over the historical carrying value was $6.8 million and was reflected as a decrease to partners' capital. Additionally, the Partnership did not assume certain liabilities of the ETG System as part of the Contribution Agreement and, as a result, the amount of such liabilities not assumed is considered a deemed contribution within the condensed consolidated statement of partners' capital. The Partnership incurred $0.7 million in transaction related expenses associated with the contribution of the ETG System for the year ended December 31, 2015. The following table summarizes the excess of consideration over the historical net carrying value of the assets acquired and liabilities assumed and net decrease to the statement of partners' capital at August 6, 2015 (in thousands):
Consideration for the ETG System: |  |  |
Cash |  | $ | 80,000
Issuance of 255,319 common units |  |  | 3,000
Total consideration |  |  | 83,000
Assets acquired and liabilities assumed: |  |  |
Current assets |  |  | 11
Property, plant and equipment, net |  |  | 87,594
Deferred tax asset |  |  | 211
Other long-term liabilities |  |  | (11,625)
Net assets acquired |  |  | 76,191
Excess of consideration over net assets acquired |  | $ | 6,809
Gas Gathering Agreement Pursuant to the terms of the Gas Gathering Agreement, the Partnership has agreed to provide gathering services to TGG on a priority basis for quantities of gas designated by TGG. AME, which is the sole member of the General Partner, has guaranteed TGG's obligations under the Gas Gathering Agreement.

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