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Acquisitions | 6 Months Ended
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Jun. 30, 2019
Business Combinations [Abstract] |
Acquisitions |
4. | Acquisitions
Asset Acquisition In December 2016, the Company entered into a contract with Chevron to issue and operate branded commercial fleet cards commencing in 2018. During October 2018, the Company entered into a definitive asset purchase agreement to acquire Chevron’s existing trade accounts receivable and customer portfolio from a third party for approximately $223.4 million. During 2018, the consideration paid consisted of approximately $162.8 million to acquire the customer portfolio and a deposit of $38.9 million was paid into escrow for a portion of the outstanding accounts receivable at the date of agreement. The actual amount of accounts receivable purchased from the third party during the second quarter of 2019 was less than the amount deposited in escrow and the Company expects to receive the excess funds from the escrow agent in the third quarter of 2019. As of December 31, 2018, the deposit related to the customer portfolio was recorded within other assets, while the deposit for the purchase of customer receivables was recorded in prepaid expenses and other current assets. During the second quarter of 2019, the Company determined that it obtained control of the customer portfolio and accounted for this transaction under the asset acquisition method of accounting. At that time, we allocated $168.0 million of consideration paid to a customer relationship intangible asset and established the accounts receivable at fair value. As of June 30, 2019, the customer relationship and acquired customer receivables were recorded within other intangible assets and accounts receivable, respectively, on our unaudited condensed consolidated balance sheet. During the three months ended June 30, 2019, the Company began amortizing this customer relationship intangible asset over the 13 year term of the Chevron agreement, which has been determined to be the period of anticipated benefit. Transaction costs related to the acquisition were insignificant and expensed as incurred. Business Acquisitions Acquisition-related costs on completed business combinations were $5.9 million and $9.0 million for the three and six months ended June 30, 2019 and immaterial for the same periods of 2018. Discovery Benefits, Inc. On March 5, 2019, the Company acquired Discovery Benefits, an employee benefits administrator, for a total purchase price of $525.6 million, including $50 million payable in January 2020, which is recorded in other current liabilities. The acquisition was primarily funded with cash on hand and through borrowings under the 2016 Credit Agreement. The seller of Discovery Benefits obtained a 4.9 percent equity interest in the newly formed parent company of WEX Health and Discovery Benefits, which constitutes the U.S. Health business. The fair value of the equity interest was determined to be $100.0 million on the acquisition date. See Note 12, Redeemable Non-Controlling Interest, for further information. This acquisition has been accounted for as a business combination, with preliminary goodwill reflecting the comprehensive suite of products and services for our partners and customers and opening go-to-market channels to include consulting firms and brokers in our Health and Employee Benefit Solutions segment. The majority of the goodwill associated with this acquisition is deductible for tax purposes. The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities acquired, based on the estimated fair value at the date of acquisition:
(In thousands) |  |
Cash consideration, net of $125,865 in cash and restricted cash acquired |  | $ | 249,781 |
Fair value of redeemable non-controlling interest |  | 100,000 |
Deferred cash consideration |  | 50,000 |
Total consideration, net of cash and restricted cash acquired |  | $ | 399,781 |
Less: |  |
Accounts receivable |  | 10,722 |
Property and equipment |  | 4,904 |
Customer relationships(a)(d) |  | 213,600 |
Developed technologies(b)(d) |  | 38,900 |
Trademarks and trade names(c)(d) |  | 13,800 |
Other assets |  | 13,601 |
Accounts payable |  | (3,071 | )
Accrued expenses |  | (7,563 | )
Restricted cash payable |  | (125,346 | )
Deferred income taxes |  | (22,200 | )
Other liabilities |  | (9,814 | )
Recorded goodwill |  | $ | 272,248 |
(a) Weighted average life - 7.3 years. (b) Weighted average life - 5.4 years. (c) Weighted average life - 7.3 years. (d) The weighted average life of all amortizable intangible assets acquired in this business combination is 7.0 years. Since the acquisition date, DBI has contributed $36.8 million in total revenues, and the amount of income before income taxes contributed to Company operations was immaterial. Noventis, Inc. On January 24, 2019, the Company acquired Noventis, a long-time customer and electronic payments network focused on optimizing payment delivery for bills and invoices to commercial entities, for $338.7 million, which was primarily funded with cash on hand and through borrowings under the 2016 Credit Agreement. Excluded from the consideration is $5.5 million paid to certain Noventis shareholders who held unvested option awards at the acquisition date. The modification of these awards to accelerate the vesting resulted in the Company recording this expense as general and administrative expense in our unaudited condensed consolidated statements of income for the three and six months ended June 30, 2019. This acquisition, which expands our reach as a corporate payments supplier and provides more channels to billing aggregators and financial institutions in our Travel and Corporate Payment Solutions segment, was accounted for as a business combination, resulting in the recording of goodwill. The goodwill associated with this acquisition is not deductible for tax purposes. The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities acquired, based on the estimated fair value at the date of acquisition:
(In thousands) |  |
Total consideration, net of $44,947 in cash acquired |  | $ | 293,767 |
Less: |  |
Accounts receivable |  | 22,134 |
Property and equipment |  | 549 |
Network relationships(a) (c) |  | 100,900 |
Developed technologies(b) (c) |  | 15,000 |
Other assets |  | 2,379 |
Accounts payable |  | (33,521 | )
Deferred income tax liabilities |  | (24,121 | )
Other liabilities |  | (2,367 | )
Recorded goodwill |  | $ | 212,814 |
(a) Weighted average life - 8.3 years. (b) Weighted average life - 2.9 years. (c) The weighted average life of all amortizable intangible assets acquired in this business combination is 7.6 years. Since the acquisition date, Noventis has contributed $20.2 million in total revenues, and the amount of income before income taxes contributed to Company operations was immaterial. Pavestone Capital, LLC On February 14, 2019, the Company acquired Pavestone Capital, a recourse factoring company that provides working capital to businesses, for a purchase price of $28.0 million, net of cash acquired. This acquisition, which was funded with cash on hand, has been accounted for as a business combination. Pavestone complements our existing factoring business and as a result the purchase price is primarily allocated to goodwill, accounts receivable and customer relationships in amounts of $9.6 million, $14.8 million and $3.9 million, respectively. The goodwill associated with this acquisition is deductible for tax purposes. Since the acquisition date, Pavestone Capital revenues and income before income taxes, which are recorded in our Fleet Solutions segment, were not material to Company operations. No pro forma or current information has been included in these financial statements as the operations of Pavestone Capital for the period that they were not part of the Company are not material to the Company’s revenues, net income and earnings per share. 2019 Business Acquisitions The Company has not finalized the purchase accounting for Discovery Benefits, Noventis or Pavestone and is currently evaluating the tax basis and allocation of the net assets acquired. Additionally, the Company is performing a valuation of intangible assets acquired in the business combinations. The preliminary estimates could change significantly upon completion of these valuations. Pro Forma Supplemental Information The pro forma information below gives effect to the Discovery Benefits and Noventis acquisitions as if they had been completed on January 1, 2018. These pro forma results have been calculated after applying the Company’s accounting policies, adjustments to reflect amortization associated with intangibles acquired and interest expense associated with the incremental borrowings under the 2016 Credit Agreement used to fund the acquisition and related income tax results. The pro forma financial information is presented for comparative purposes only, based on certain estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of future results of operations or the results that would have been reported if the acquisitions had been completed on January 1, 2018. The following represents unaudited pro forma operational results as if the acquisitions had occurred January 1, 2018:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Total revenues | $ | 441,807 |  |  | $ | 397,408 |  |  | $ | 842,789 |  |  | $ | 779,234 |
Net income attributable to shareholders | $ | 15,225 |  |  | $ | 33,790 |  |  | $ | 34,035 |  |  | $ | 76,277 |
Net income attributable to shareholders per share: |  |  |  |  |  |  |
Basic | $ | 0.35 |  |  | $ | 0.78 |  |  | $ | 0.79 |  |  | $ | 1.77 |
Diluted | $ | 0.35 |  |  | $ | 0.77 |  |  | $ | 0.78 |  |  | $ | 1.75 |
Go Fuel Card On July 1, 2019, the Company acquired Go Fuel Card, a European fuel card business, for a total purchase price of €235.0 million (equivalent of $266.0 million on date of purchase). The Company has performed a preliminary valuation analysis, which is based on estimates and assumptions that are subject to change within the measurement period. We currently expect to recognize other intangible assets equal to approximately half of the purchase price, comprised of merchant network and customer relationships. Additionally, we expect to record a similar amount of goodwill as part of this business combination, for which we are still determining the deductibility for income tax purposes. We expect that this acquisition will strengthen our position in the European market and reduce our sensitivity to retail fuel prices.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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