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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions |
4. | Acquisitions
The Company incurred and expensed costs directly related to completed acquisitions of $2.4 million, $97.9 million and $13.0 million in 2021, 2020 and 2019, respectively. Costs incurred and expensed related to acquisitions in-process were immaterial for the years ended December 31, 2021 and 2020, and were $4.8 million for the year ended 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 On April 1, 2021, WEX Inc. completed the acquisition of certain contractual rights to serve as custodian or sub-custodian to over $3 billion of HSAs from the HealthcareBank division of Bell Bank, which is owned by State Bankshares, Inc. This acquisition increased the Company’s role in its customer-directed healthcare ecosystem and aligns with its growth strategy. On the closing of the acquisition, WEX Inc. paid Bell Bank initial cash consideration of $200.0 million. Pursuant to the purchase agreement, WEX Inc. agreed to make an additional deferred cash payment of $25.0 million in July 2023 and a second additional deferred cash payment of $25.0 million in January 2024. As of June 1, 2021, in connection with the acquisition by WEX Health of Cirrus Holdings, LLC further discussed below in this Note 4, Acquisitions and in Note 19, Redeemable Non-Controlling Interest, the second deferred payment of $25.0 million was reduced by the amount of $12.5 million (the “Payment Offset”). As a result of the Payment Offset, WEX Inc. continues to owe Bell Bank $12.5 million for the second additional deferred cash payment, which is due and payable in January 2024. The purchase agreement also includes potential additional consideration payable to Bell Bank annually that is calculated on a quarterly basis and is contingent, and based, upon any future increases in the Federal Funds rate. The contingent payment period began on July 1, 2021 and shall extend until the earlier of (i) the year ending December 31, 2030, or (ii) the date when the cumulative amount paid as contingent consideration equals $225.0 million. Given the acquisition does not meet the definition of a business, the Company accounted for this transaction as an asset acquisition, recognizing $263.4 million as a definite-lived intangible rights asset as of the acquisition date, with a weighted average life of 5.6 years. As more fully described in Note 19, Redeemable Non-Controlling Interest, as part of this acquisition WEX Inc. allocated $11.2 million of the initial cash consideration to the repurchase of SBI’s non-controlling interest in the U.S. Health business, reducing SBI’s ownership percentage to 4.53 percent. Additionally, the Company recorded an initial deferred liability of $47.4 million equal to the present value of the deferred cash payments and a derivative liability of $27.2 million related to the additional consideration contingent upon future increases in the Federal Funds rate. Refer to Note 18, Fair Value, for further information on the valuation of the derivative liability. The deferred payments and derivative liability are presented as other liabilities within the consolidated balance sheet as of December 31, 2021. Transaction costs related to the acquisition were immaterial and expensed as incurred. During October 2021, the Company transferred $960 million of these HSA assets previously managed by third party depository institutions to WEX Bank. See Note 11, Deposits for more information. Acquisition of Remaining Interest in WEX Europe Services On April 13, 2021, the Company both entered into a share purchase agreement for, and consummated the acquisition of, the remaining interest in WEX Europe Services it did not own previously, which consisted of 25 percent of the issued ordinary share capital, for a purchase price of $97.0 million. As a result of the transaction, the Company now owns 100 percent of the issued ordinary share capital of WEX Europe Services, which operates part of our European Fleet business. This transaction further streamlines the European Fleet business in order to create revenue synergies and increases our ability to manage the associated cost structure. Given the Company had a controlling interest in WEX Europe Services prior to the transaction, the acquisition has been accounted for as an equity transaction.
(In thousands) |
Purchase price | $ | 96,992 |
Reduction in: |
Non-controlling interest 1 | (13,077) |
Accumulated other comprehensive income | (2,284) |
Additional paid-in capital 2 | (81,631) |
1 Reduces non-controlling interest to zero as of the acquisition date. 2 In conjunction with the acquisition, the Company incurred $0.5 million in acquisition costs, which further reduced additional paid-in capital. Business Acquisitions The following acquisitions have been accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. 2021 benefitexpress Acquisition On June 1, 2021, WEX Inc.’s subsidiary, WEX Health, completed the acquisition of Cirrus Holdings, LLC, the indirect owner of Benefit Express Services, LLC, which is a provider of highly configurable, cloud-based benefits administration technologies and services doing business under the name benefitexpress (the “benefitexpress Acquisition”). The transaction expanded the Company’s role in the healthcare ecosystem, bringing benefit administration, compliance services, and consumer-directed health and lifestyle spending accounts together to form a full-service benefits marketplace. Pursuant to the terms of the definitive purchase agreement, WEX Health consummated the benefitexpress Acquisition for total consideration of approximately $275 million, subject to certain working capital and other adjustments. WEX Health is owned by WEX Inc.’s subsidiary PO Holding LLC (“PO Holding”), which is majority owned by WEX Inc., with a non-controlling interest being held by SBI, which is owned by State Bankshares, Inc., the owner of Bell Bank. To facilitate the benefitexpress Acquisition, WEX Inc., PO Holding, SBI and Bell Bank entered into a subscription agreement with respect to PO Holding (the “Subscription Agreement”). Pursuant to the Subscription Agreement, on June 1, 2021, WEX Inc. purchased approximately $262.5 million in value of shares in PO Holding and SBI acquired approximately $12.5 million in value of shares in PO Holding in exchange for SBI granting the Payment Offset to WEX Inc. with respect to the asset acquisition from Bell Bank. The table below summarizes the preliminary allocation of fair value to the assets acquired and liabilities assumed on the acquisition date. These fair values may continue to be revised during the measurement period as third-party valuations on the intangible assets are finalized, further information becomes available and additional analyses are performed, and these adjustments could have a material impact on the 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 estimated fair value at the date of acquisition:
(In thousands) |  | As Reported December 31, 2021
Cash consideration transferred, net of $15.0 million in cash and restricted cash acquired |  | $ | 259,061 |
Less: |  |
Accounts receivable |  | 3,103 |
Customer relationships(a)(d) |  | 84,400 |
Developed technologies(b)(d) |  | 19,600 |
Non-compete(c)(d) |  | 2,150 |
Other assets |  | 4,387 |
Accrued expenses |  | (3,498) |
Restricted cash payable |  | (14,328) |
Other liabilities |  | (5,177) |
Recorded goodwill |  | $ | 168,424 |
(a) Weighted average life -9.3 years. (b) Weighted average life - 3.6 years. (c) Weighted average life -2.5 years. (d) The weighted average life of the $106.2 million of amortizable intangible assets acquired in this business combination is 8.1 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 goodwill recognized as a result of the acquisition is expected to be deductible for tax purposes. Since the acquisition date through December 31, 2021, benefitexpress has contributed $24.2 million in total revenues and $2.1 million of losses before income taxes to Company operations. No pro forma information has been included in these financial statements, as the operations of benefitexpress 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. 2020 eNett and Optal Acquisition/Legal Settlement On January 24, 2020, the Company entered into a purchase agreement (the “Original Purchase Agreement”) to purchase eNett, a leading provider of B2B payment solutions to the travel industry, and Optal, a company that specializes in optimizing B2B payments transactions. 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. A London court held a trial of certain preliminary issues from September 21, 2020 through September 29, 2020 and handed down its judgment 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 $615.5 million, after a $1.9 million working capital adjustment for Optal received by the Company during the first quarter of 2021 and a $2.0 million working capital adjustment for eNett paid by the Company during the second quarter of 2021. The Company purchased these businesses to complement its existing Travel and Corporate Solutions segment and expand its international footprint, creating synergies from the increased scale of our operations. The Company determined that the aggregate purchase price represents consideration paid for the businesses acquired and for the settlement of the 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 was allocated to the settlement of the legal proceedings, which was included in legal settlement expense during the fourth quarter of 2020. This acquisition has been accounted for as a business combination, which requires that the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. As of December 31, 2021, the purchase accounting is final for the acquisition. 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) |  | As Reported December 31, 2020 |  | Measurement Period Adjustments |  | As Reported December 31, 2021 (Final)
Cash consideration transferred, net of $232,155 in cash and restricted cash acquired |  | $ | 383,204 |  |  | $ | 119 |  |  | $ | 383,323 |
Less: legal settlement |  | (162,500) |  |  | — |  |  | (162,500) |
Total consideration, net |  | $ | 220,704 |  |  | $ | 119 |  |  | $ | 220,823 |
Less: |  |  |  |  |  |
Accounts receivable |  | 14,449 |  |  | — |  |  | 14,449 |
Property and equipment |  | 876 |  |  | — |  |  | 876 |
Customer relationships(a)(c) |  | 79,923 |  |  | (32,323) |  |  | 47,600 |
Developed technologies(b)(c) |  | 63,125 |  |  | (56,825) |  |  | 6,300 |
License agreements |  | 4,208 |  |  | (4,208) |  |  | — |
Deferred income tax asset |  | 9,424 |  |  | 3,552 |  |  | 12,976 |
Other assets |  | 16,605 |  |  | — |  |  | 16,605 |
Accounts payable |  | (16,244) |  |  | — |  |  | (16,244) |
Accrued expenses |  | (21,898) |  |  | — |  |  | (21,898) |
Restricted cash payable |  | (186,956) |  |  | — |  |  | (186,956) |
Deferred income tax liability |  | (20,152) |  |  | 12,385 |  |  | (7,767) |
Other liabilities |  | (14,540) |  |  | (888) |  |  | (15,428) |
Recorded goodwill |  | $ | 291,884 |  |  | $ | 78,426 |  |  | $ | 370,310 |
(a) Weighted average life - 7.3 years. (b) Weighted average life - 0.5 years. (c) The weighted average life of the $53.9 million of amortizable intangible assets acquired in this business combination is 6.5 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 deductible for tax purposes. From 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, which include the impact of measurement period adjustments recorded during the year ended December 31, 2021:
| 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 | $ | (49,480) |  |  | $ | (62,315) |
Net loss attributable to shareholders per share: |  |  |
Basic | $ | (1.13) |  |  | $ | (1.44) |
Diluted | $ | (1.13) |  |  | $ | (1.44) |
2019 Business Acquisitions As of December 31, 2020, the purchase accounting was final for our 2019 business acquisitions. No adjustments to the purchase accounting were made during the years ended December 31, 2021 and 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. The seller of Discovery Benefits obtained a 4.9 percent equity interest in PO Holding, the newly formed parent company of WEX Health and Discovery Benefits, which together constituted the U.S. Health business at the time of the acquisition. The fair value of the equity interest was determined to be $100.0 million on the acquisition date. See Note 19, 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 was accounted for as a business combination, resulting in the recording of goodwill. The majority of the associated goodwill is deductible for tax purposes. From the acquisition date through 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. Excluded from the consideration was $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 statement of operations. 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. From the acquisition date through 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. The Company purchased Pavestone Capital to complement its existing factoring business. This acquisition was accounted for as a business combination, resulting in the recording of goodwill. The goodwill associated with this acquisition is deductible for tax purposes. From the acquisition date through 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 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). 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. This acquisition was accounted for as a business combination, resulting in the recording of goodwill. The goodwill associated with the acquisition of Go Fuel Card is deductible for tax purposes. From the acquisition date through 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.
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 |  |
Total revenues | $ | 1,742,797 |  |  |
Net income attributable to shareholders | $ | 113,851 |  |  |
Net income attributable to shareholders per share: |  |  |
Basic | $ | 2.63 |  |  |
Diluted | $ | 2.60 |  |  |

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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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