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Acquisitions | 12 Months Ended
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Dec. 31, 2020
Business Combinations [Abstract] |
Acquisitions |
4. | Acquisitions
The Company incurred and expensed costs directly related to completed acquisitions of $97.9 million, $13.0 million and $2.5 million in 2020, 2019 and 2018, respectively. Acquisition costs incurred and expensed during 2020 include financing fees, investment banker success fees and other legal and professional fees incurred in conjunction with the 2020 acquisition. Costs incurred and expensed related to acquisitions in process were immaterial as of December 31, 2020 and $4.8 million as of December 31, 2019. Acquisition-related costs for all years presented are included within general and administrative expenses, except for the financing fees incurred in 2020, that are presented in financing interest expense in the consolidated statements of operations. Asset Acquisition 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 $223.4 million. During 2018, the consideration paid consisted of $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 the 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, resulting in the Company receiving the excess funds of approximately $27 million from the escrow agent in January 2020. 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 approximately $168.0 million of consideration paid to a customer relationship intangible asset and established the accounts receivable at fair value. This customer relationship intangible asset is being amortized over the 13 year term of the Chevron agreement, which has been determined to be the period of anticipated benefit, which began when the Company took possession of the customer portfolio during the second quarter of 2019. Transaction costs related to the acquisition were insignificant and expensed as incurred. Business Acquisitions 2020 Acquisition/Legal Settlement On January 24, 2020, the Company entered into a purchase agreement (the "Original Purchase Agreement") to purchase eNett and Optal for an aggregate purchase price comprised of $1.3 billion in cash and 2.0 million shares of the Company’s common stock and subject to certain working capital and other adjustments as described in the purchase agreement. The parties’ obligations to consummate the acquisition were subject to customary closing conditions, including the absence of a Material Adverse Effect (as defined in the Original Purchase Agreement between WEX, eNett and Optal, among others). The Company subsequently concluded that the COVID-19 pandemic and conditions arising in connection with it had a Material Adverse Effect on the businesses, which was disproportionate to the effect on others in the relevant industry. Because of this Material Adverse Effect, WEX formally advised eNett and Optal on May 4, 2020 that it was not required to close the transaction pursuant to the terms of the purchase agreement. On May 11, 2020, the shareholders of eNett and Optal each initiated separate legal proceedings in the High Court of Justice of England and Wales in the United Kingdom against the Company seeking a declaration that no Material Adverse Effect had occurred and an order for specific performance of WEX's obligations under the Original Purchase Agreement. From September 21, 2020 through September 29, 2020, a London court held a trial of certain preliminary issues, and handed down its judgement on October 12, 2020. The Company and the claimants each sought permission to appeal certain portions of the Court’s judgment. On December 15, 2020, the Company entered into a Deed of Settlement (the “Settlement Deed”) between the Company, eNett, Optal and the other parties thereto, providing for, among other things, (i) the dismissal with prejudice of the legal proceedings and appeals described above, (ii) the amendment of the Original Purchase Agreement (as amended by the Settlement Deed, the “Amended Purchase Agreement”) and (iii) the release of all claims capable of arising out of, or in any way connected with or relating to the COVID-19 pandemic, but excluding any of the claims arising under the Amended Purchase Agreement. The closing of the acquisition occurred concurrent with the execution of the Settlement Deed on December 15, 2020. The Amended Purchase Agreement provided for, among other things, a reduction of the aggregate purchase price for the acquisition to $577.5 million (subject to certain working capital and other adjustments as described in the Amended Purchase Agreement, which resulted in a total cash payment of $615.4 million). The Company purchased these businesses to complement its existing Travel and Corporate Solutions segment and expand its international footprint. The Company determined the aggregate purchase price represents consideration paid for the businesses acquired and for the settlement of legal proceedings described above. The preliminary fair value of the businesses acquired was estimated to be $415.0 million using a discounted cash flow analysis and guideline transaction method. Since the Company was not able to reliably estimate the fair value of the legal settlement, the residual value of $162.5 million has been allocated to the legal proceedings settlement, which has been included in legal settlement expense in the consolidated statement of operations for the year ended December 31, 2020. This acquisition has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will be revised during the measurement period as third-party valuations on the intangible assets are received and finalized, further information becomes available and additional analyses are performed, and these adjustments could have a material impact on the preliminary purchase price allocation. The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities acquired, based on the fair value at the date of acquisition:
(In thousands) |  |
Cash consideration transferred, net of $232,155 in cash and restricted cash acquired |  | $ | 383,204 |
Less: legal settlement |  | (162,500) |
Total consideration, net |  | $ | 220,704 |
Less: |  |
Accounts receivable |  | 14,449 |
Prepaid and other current assets |  | 11,660 |
Property and equipment |  | 876 |
Customer relationships(a)(d) |  | 79,923 |
Developed technologies(b)(d) |  | 63,125 |
License agreements(c)(d) |  | 4,208 |
Deferred income tax asset |  | 9,424 |
Other assets |  | 4,945 |
Accounts payable |  | (16,244) |
Accrued expenses |  | (21,898) |
Restricted cash payable |  | (186,956) |
Other current liabilities |  | (11,376) |
Deferred income tax liability |  | (20,152) |
Other liabilities |  | (3,164) |
Recorded goodwill |  | $ | 291,884 |
(a) Weighted average life - 5 years. (b) Weighted average life - 2.5 years. (c) Weighted average life - 6.5 years. (d) The weighted average life of the $147.3 million of amortizable intangible assets acquired in this business combination is 4.0 years. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring the businesses. The majority of the goodwill recognized as a result of the acquisition is not expected to be deductible for tax purposes. Given the timing of the acquisition, the Company utilized a benchmarking approach based on the Company's prior acquisitions and similar industry acquisitions to determine the preliminary fair values for intangible assets. See Note 9, Goodwill and Other Intangible Assets, for additional information. Since the acquisition date and through December 31, 2020, eNett and Optal have contributed immaterial total revenues and loss before income taxes. The pro forma information below gives effect to the acquisition as if it had been completed on January 1, 2019. These pro forma results have been calculated after applying the Company’s accounting policies, adjustments to reflect amortization associated with intangibles acquired and related income tax results. Additionally, nonrecurring pro-forma adjustments of $162.5 million in legal settlement costs and transaction-related costs incurred in the fourth quarter of 2020 have been reflected in the proforma results for the year ended December 31, 2019. 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, 2019. The following represents unaudited pro forma operational results:
| Year Ended December 31,
(In thousands, except per share data) | 2020 |  | 2019
Total revenues | $ | 1,610,216 |  |  | $ | 1,876,494 |
Net loss attributable to shareholders | $ | (63,595) |  |  | $ | (71,788) |
Net loss attributable to shareholders per share: |  |  |
Basic | $ | (1.45) |  |  | $ | (1.66) |
Diluted | $ | (1.45) |  |  | $ | (1.66) |
2019 Business Acquisitions As of December 31, 2020, the purchase accounting is final for our 2019 business acquisitions. No adjustments to the purchase accounting were made during the year ended December 31, 2020. Discovery Benefits On March 5, 2019, the Company acquired Discovery Benefits, an employee benefits administrator, for a total purchase price of $526.1 million, of which $50.0 million was paid during the fourth quarter of 2019. The acquisition was primarily funded with cash 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 20, Redeemable Non-Controlling Interest, for further information. The purpose of this acquisition was to obtain the comprehensive suite of products and services for our partners and customers and to open go-to-market channels to include consulting firms and brokers in our Health and Employee Benefit Solutions segment. This acquisition has been accounted for as a business combination, resulting in the recording of goodwill. The majority of the associated goodwill is deductible for tax purposes. The following is a summary of the final allocation of the purchase price to the assets and liabilities acquired, based on the fair value at the date of acquisition:
(In thousands) |  |
Cash consideration, net of $125,865 in cash and restricted cash acquired |  | $ | 300,191 |
Fair value of redeemable non-controlling interest |  | 100,000 |
Total consideration, net of cash and restricted cash acquired |  | $ | 400,191 |
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 |  | (21,941) |
Other liabilities |  | (9,814) |
Recorded goodwill |  | $ | 272,399 |
(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 the $266.3 million of amortizable intangible assets acquired in this business combination is 7.0 years. From the acquisition date to December 31, 2019, Discovery Benefits contributed $94.7 million in total revenues and income before income taxes of $0.3 million. Noventis 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 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 on our consolidated income statement. The Company purchased Noventis to expand our reach as a corporate payments supplier and provide more channels to billing aggregators and financial institutions in our Travel and Corporate Solutions segment. This acquisition 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 final allocation of the purchase price to the assets and liabilities acquired, based on the 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 taxes |  | (21,194) |
Other liabilities |  | (2,367) |
Recorded goodwill |  | $ | 209,887 |
(a) Weighted average life - 8.3 years. (b) Weighted average life - 2.9 years. (c) The weighted average life of the $115.9 million of amortizable intangible assets acquired in this business combination is 7.6 years. From the acquisition date to December 31, 2019, Noventis contributed $43.8 million in total revenues and income before income taxes of $8.2 million. 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, has been accounted for as a business combination. The Company purchased Pavestone Capital to complement its existing factoring business. As a result, the purchase price is primarily allocated to goodwill, accounts receivable and customer relationships in amounts of $9.5 million, $14.9 million and $3.9 million, respectively. The goodwill associated with this acquisition is deductible for tax purposes. The customer relationships intangible asset has a weighted-average amortization period of 6.5 years. From the acquisition date to December 31, 2019, 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. 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). This acquisition, which was funded with cash, was accounted for as a business combination. The purpose of the acquisition was to strengthen our position in the European market, grow our existing customer base and reduce our sensitivity to retail fuel prices, resulting in the recording of goodwill. The goodwill associated with the acquisition of Go Fuel Card is deductible for tax purposes. The following is a summary of the final allocation of the purchase price to the assets and liabilities acquired, based on the fair value at the date of acquisition:
(In thousands) |  |
Total consideration, net of $5,589 in cash acquired |  | $ | 260,455 |
Less: |  |
Network relationships(a) (d) |  | 112,893 |
Customer relationships(b)(d) |  | 33,963 |
Brand name(c) (d) |  | 442 |
Deposits |  | (5,169) |
Accrued expenses |  | (420) |
Recorded goodwill |  | $ | 118,746 |
(a) Weighted average life - 10.1 years. (b) Weighted average life - 5.0 years. (c) Weighted average life - 1.0 year. (d) The weighted average life of the $147.3 million of amortizable intangible assets acquired in this business combination is 8.9 years. From the acquisition date to December 31, 2019, Go Fuel Card contributed $10.5 million in total revenues and loss before income taxes of $9.1 million. No pro forma information has been included in these financial statements as the operations of Go Fuel Card 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. During the Company's annual goodwill assessment completed as of October 1, 2020, management determined that the carrying value of this reporting unit exceeded its fair value and the Company recorded a non-cash goodwill impairment charge of $53.4 million, reducing the Go Fuel Card goodwill to $65.8 million. See Note 9, Goodwill and Other Intangible Assets, for further information. Pro Forma Supplemental Information (Discovery Benefits and Noventis) 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 acquisitions 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:
| Year Ended December 31,
(In thousands, except per share data) | 2019 |  | 2018
Total revenues | $ | 1,742,797 |  |  | $ | 1,604,165 |
Net income attributable to shareholders | $ | 113,851 |  |  | $ | 134,564 |
Net income attributable to shareholders per share: |  |  |
Basic | $ | 2.63 |  |  | $ | 3.12 |
Diluted | $ | 2.60 |  |  | $ | 3.09 |

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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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