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TOWERJAZZ PANASONIC SEMICONDUCTOR CO., LTD. ESTABLISHMENT
 12 Months Ended
Dec. 31, 2014
TOWERJAZZ PANASONIC SEMICONDUCTOR CO., LTD. ESTABLISHMENT [Abstract]  
TOWERJAZZ PANASONIC SEMICONDUCTOR CO., LTD. ESTABLISHMENT
NOTE 3
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TOWERJAZZ PANASONIC SEMICONDUCTOR CO., LTD.ESTABLISHMENT
 

Pursuant to agreements signed between Panasonic Corporation (“Panasonic”) and Tower, Panasonic formed a fully-owned subsidiary named TPSCo in March 2014. Further to said agreements, (a) Panasonic transferred licenses use rights of its semiconductor wafer manufacturing process and transferred its capacity tools of 8 inch and 12 inch at three of its fabs located in Hokuriku Japan (Uozu, Tonami and Arai) to TPSCo; and (b) Tower acquired 51% of the shares of TPSCo in consideration for the issuance of ordinary shares of Tower to Panasonic valued at approximately $7,411


The purchase price has been allocated on the basis of the estimated fair value of the assets purchased and the liabilities assumed. The estimated fair value of the assets, net amounted to $180,935. As the fair value of the net assets acquired less the non-controlling interest exceeded the purchase price, Tower recognized a gain on the acquisition in the amount of $166,404.

           
The Company believes that the gain realized from the acquisition mainly derived from the fact that Panasonic's fabs were not fully utilized in recent years and were anticipated to remain so in the coming years, hence any volume manufacturing and revenue resulting from the transaction with Tower, due to Tower's customer base, contacts, technologies and foundry management and operations expertise will benefit Panasonic and directly increase the value of the transferred assets.

The allocation of fair value to the assets acquired and liabilities assumed is as follows:

   
As of
March 31, 2014
  

Current assets
   $ 91,414  

Machinery and equipment
     245,278  

Intangible assets
     24,520  

Total assets as of acquisition date
   $ 361,212  
         

Current liabilities
   $ 1,426  

Long-term Loan
     85,249  
Defered tax liability     93,602  

Total liabilities as of acquisition date
   $ 180,277  
         
Total net assets acquired   $ 180,935  
The fair value non-controlling interests in TPSCo     7,120  
Tower's consideration     7,411  
Gain on acquisition   $ 166,404  

The fair value of the non-controlling interest in the table above was derived based on the purchase price paid by Tower to Panasonic in consideration for the acquisition of 51% of TPSCo's shares.

 
The fair values set forth above are based on a valuation of TPSCo's assets and liabilities performed by third party professional valuation experts hired by the Company to appraise the fair value of the assets in accordance with ASC 805-10 "Business Combinations".
 

TPSCo, Tower and Panasonic also agreed to the following, among others: (i) a five-year manufacturing agreement between Panasonic and TPSCo, under which Panasonic will acquire products from TPSCo; (ii) a five-year production related and complimentary services agreement between Panasonic and TPSCo, under which Panasonic will acquire services from TPSCo; (iii) TPSCo will license certain technologies from Panasonic in order to utilize certain Panasonic process technologies for the manufacturing of products; (iv) Panasonic will provide TPSCo with various transition services and support; (v) TPSCo will lease the manufacturing buildings and related facilities infrastructure from Panasonic; and (iv) TPSCo will receive services from Tower including marketing, sales, general and administration services.

Pro forma financial information is not presented since the financial information of the acquire was prepared for internal use within its group and is not representative of the financial statements of the acquire had it been standalone entity.