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Business Combination | 9 Months Ended
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Sep. 30, 2018
Business Combinations [Abstract] |
Business Combination | 3. Business Combination Summary On November 13, 2017, the Company entered into a Share Sale Agreement as amended by the Waiver and Variation Agreement, dated April 11, 2018 (collectively referred to as the “Share Sale Agreement”) with ETFS Capital and WisdomTree International Holdings Ltd, an indirect wholly owned subsidiary of the Company (“WisdomTree International”), pursuant to which the Company agreed to acquire ETFS. On April 11, 2018, the Company completed the acquisition by purchasing the entire issued share capital of a subsidiary of ETFS Capital into which ETFS Capital transferred ETFS prior to completion of the ETFS Acquisition. Pursuant to the Share Sale Agreement, the Company acquired ETFS for a purchase price consisting of (a) $253,000 in cash (including $53,000 paid from proceeds arising from maturities of securities owned, at fair value), subject to customary adjustments for working capital, and (b) a fixed number of shares of the Company’s capital stock, consisting of (i) 15,250,000 shares of common stock (the “Common Shares”) and (ii) 14,750 shares of Series A Non-Voting Convertible Preferred Stock (the “Preferred Shares”), which are convertible, subject to certain restrictions, into an aggregate of 14,750,000 shares of common stock. On April 11, 2018 and in connection with the ETFS Acquisition, the Company and WisdomTree International entered into a credit agreement (the “Credit Agreement”), by and among the Company, WisdomTree International, certain subsidiaries of the Company as guarantors, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent, collateral agent, L/C Issuer and lender. Under the Credit Agreement, the lenders extended a $200,000 term loan (the “Term Loan”) to WisdomTree International, the net cash proceeds of which were used by WisdomTree International, together with other cash on hand, to complete the acquisition and pay certain related fees, costs and expenses, and made a $50,000 revolving credit facility (the “Revolver” and, together with the Term Loan, the “Credit Facility”) available to the Company and WisdomTree International for revolving borrowings from time to time for working capital, capital expenditures and general corporate purposes (See Note 12). On April 11, 2018 and in connection with the acquisition, the Company and ETFS Capital also entered into an Investor Rights Agreement, pursuant to which, among other things, ETFS Capital is subject to lock-up, standstill and voting restrictions. ETFS Capital also received certain registration rights with respect to the Common Shares and the shares of common stock issuable upon conversion of the Preferred Shares it received in the transaction. Purchase Price Allocation The ETFS Acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration paid by the Company to the identifiable assets and liabilities of ETFS based on the estimated fair values as of the closing date of the acquisition. An allocation of the consideration transferred is presented below based on information currently available and includes the Company’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed. The following table summarizes the allocation of the purchase price as of the acquisition date:
Purchase price |
Preferred Shares issued |  |  | 14,750 |
Conversion ratio |  |  | 1,000 |
Common stock equivalents |  |  | 14,750,000 |
Common Shares issued |  |  | 15,250,000 |
Total shares issued |  |  | 30,000,000 |
WisdomTree stock price(1) |  | $ | 9.00 |
Equity portion of purchase price |  | $ | 270,000 |
Cash portion of purchase price |  |  |  |
Term Loan (See Note 12) |  |  | 200,000 |
Cash on hand |  |  | 53,000 |
Purchase price |  |  | 523,000 |
Deferred consideration (See Note 11) |  |  | 172,746 |
Total |  | $ | 695,746 |
Allocation of consideration |  |  |  |
Cash and cash equivalents |  |  | 13,687 |
Receivables and other current assets |  |  | 14,069 |
Intangible assets(2) |  |  | 601,247 |
Other current liabilities |  |  | (17,314 | )
Fair value of net assets acquired |  |  | 611,689 |
Goodwill resulting from the ETFS Acquisition (3) |  | $ | 84,057 |
(1) | The closing price of the Company’s common stock on April 10, 2018, the last trading day prior to the closing date of the acquisition.
(2) | Represents purchase price allocated to customary advisory agreements. The fair value of the intangible assets was determined using an income approach (discounted cash flow analysis) which relied upon significant unobservable inputs including a revenue growth multiple of 3% to 4% and a weighted average cost of capital of 11.6%. These intangible assets were determined to have an indefinite useful life and are not deductible for tax purposes. A deferred tax liability associated with these intangible assets was not recognized as the intangibles arose in Jersey, where the Company will be subject to a zero percent tax rate.
(3) | Goodwill arising from the ETFS Acquisition represents the value of expected synergies created from combining the operations of ETFS and the Company. The goodwill is not deductible for tax purposes as the transaction was structured as a stock acquisition occurring in the United Kingdom.
Acquisition-Related Costs During the three and nine months ended September 30, 2018, the Company incurred acquisition-related costs associated with the ETFS Acquisition of $456 and $10,446, respectively. Costs incurred during the three months ended September 30, 2018 were primarily related to the integration of ETFS. Costs incurred during the nine months ended September 30, 2018 included professional advisor fees, severance and other compensation costs, a write-off of the Company’s office lease and other integration costs. Operating Results of ETFS The Company’s Consolidated Statements of Operations include the following operating results of ETFS since the acquisition date of April 11, 2018 through September 30, 2018:
Revenues: |  | $37,137
Income before taxes: |  | $33,496 (including a gain on revaluation of deferred consideration of $17,630)
Supplemental Unaudited Pro Forma Financial Information The following table presents unaudited pro forma financial information of the Company as if the ETFS Acquisition had been consummated on January 1, 2017. The information was derived from the historical financial results of the Company and ETFS for all periods presented and was adjusted to give effect to pro forma events that are directly attributable to the acquisition, factually supportable and expected to have a continuing impact on the combined results following the acquisition.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Revenues |  |  | n/a |  |  | $ | 78,594 |  |  | $ | 229,674 |  |  | $ | 228,004 |
Net income |  |  | n/a |  |  | $ | 6,736 |  |  | $ | 48,088 |  |  | $ | 22,011 |
Included within the pro forma financial information above is a gain/(loss) on revaluation of deferred consideration of ($4,869) for the three months ended September 30, 2017, and $4,670 and ($15,088) for the nine months ended September 30, 2018 and 2017, respectively. Significant adjustments to the unaudited pro forma financial information above include the recognition of interest expense associated with the Credit Facility for the periods presented, eliminating acquisition-related costs directly attributable to the acquisition and adjusting consolidated income tax expense based upon the Company’s anticipated normalized consolidated effective tax rate. The unaudited pro forma financial information above is not necessarily indicative of what the combined results of the Company would have been had the acquisition been completed as of January 1, 2017 and does not purport to project the future results of the combined company. In addition, the unaudited pro forma financial information does not reflect any future planned cost savings initiatives following the completion of the acquisition.

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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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