| . The allocation of the purchase price is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
Total consideration (a)
|
|
|
$ |
1,951 |
|
Cash withheld to repay La Quinta Holdings Inc.’s estimated tax liability (b)
|
|
|
(240 |
) |
Cash withheld to pay employee-related equity award liabilities |
|
|
(8 |
) |
Net cash consideration |
|
|
1,703 |
|
|
|
|
|
Cash escrowed from CorePoint (c)
|
$ |
985 |
|
|
|
Payment of La Quinta Holdings Inc.’s long‑term debt (c)
|
(985 |
) |
|
|
|
— |
|
|
— |
|
Cash utilized to repay La Quinta Holdings Inc.’s long‑term debt (d)
|
|
|
(715 |
) |
Net cash consideration (to shareholders of La Quinta Holdings Inc.) |
|
|
$ |
988 |
|
|
|
|
|
Total current assets (e)
|
|
|
$ |
67 |
|
Property and equipment |
|
|
17 |
|
Trademarks (f)
|
|
|
710 |
|
Franchise agreements (f)
|
|
|
260 |
|
Management contracts (f)
|
|
|
119 |
|
Other assets |
|
|
5 |
|
Total assets acquired |
|
|
$ |
1,178 |
|
|
|
|
|
Total current liabilities (e)
|
|
|
$ |
89 |
|
Deferred income taxes (g)
|
|
|
254 |
|
Long‑term debt repaid at acquisition (c)
|
|
|
715 |
|
Assumed tax liability (b)
|
|
|
240 |
|
Other liabilities |
|
|
11 |
|
Total liabilities assumed |
|
|
1,309 |
|
Net identifiable liabilities acquired |
|
|
(131 |
) |
Goodwill (h)
|
|
|
1,119 |
|
Total consideration transferred |
|
|
$ |
988 |
|
______________________
|
|
(a) |
Includes additional consideration of $1 million related to a net debt adjustment paid to CorePoint during the third quarter of 2018.
|
|
|
(b) |
Reflects a portion of the purchase price in which $195 million and $35 million was paid in 2019 and 2018, respectively, related to the tax liability assumed in the La Quinta acquisition. Additionally, $10 million was paid directly to CorePoint in 2019 which was reported in other, net within financing activities in the Consolidated and Combined Statements of Cash Flows.
|
|
|
(c) |
As a result of a change in control provision within La Quinta’s long-term indebtedness, CorePoint deposited $985 million into an escrow account which was utilized to repay a portion of La Quinta Holdings Inc.’s existing indebtedness.
|
|
|
(d) |
Reflects the portion of La Quinta Holdings Inc.’s long-term debt that was required to be paid by the Company upon a change in control. |
|
|
(e) |
The fair values of total current assets and total current liabilities are estimated to approximate their current carrying values. |
|
|
(f) |
The identifiable intangible assets consist of trademarks with an indefinite life, franchise agreements which have a weighted average life of 25 years and management agreements which have a weighted average life of 15 years. The fair valuation was performed with the assistance of a third‑party valuation firm, which included the consideration of various valuation techniques that the Company deems appropriate for the measurement of fair value of the assets acquired and liabilities assumed.
|
The valuations of the franchise agreements and management agreements are based on a discounted cash flow method utilizing forecasted cash flows from La Quinta’s existing franchise agreements and CorePoint franchise agreements and management agreements (the “CorePoint agreements”) that are estimated to be generated over the estimated terms of such contracts. The expected cash flows projections were based on the terms of the agreements, and adjusted for inflation and the costs and expenses required to generate the revenues under such agreements.
The significant assumptions that were utilized for La Quinta’s franchise agreements were: (i) forecasted gross room revenues, (ii) a franchise fee of 4.5%, tax affected, and (iii) a discount rate of 9.5%.
The significant assumptions that were utilized for the CorePoint agreements were: (i) forecasted gross room revenues, (ii) franchise and management fee rates of 5.0% each, which were tax affected, and (iii) a discount rate of 9.5% and 10.5% for CorePoint franchise and management agreements, respectively.
|
|
(g) |
The deferred tax liability primarily results from the fair value adjustments for the identifiable intangible assets. This estimate of deferred tax liabilities was determined based on the book and tax basis differences attributable to the identifiable intangible assets acquired at a combined federal and state effective tax rate. |
(h)
The goodwill recognized in the La Quinta acquisition is not expected to be deductible for income tax purposes.
The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with Wyndham Hotels’ acquisition of AmericInn:
|
|
|
|
|
|
Amount |
Trade receivables |
$ |
3 |
|
Goodwill (a)
|
44 |
|
Franchise agreements (b)
|
46 |
|
Trademarks |
51 |
|
Total assets acquired |
144 |
|
Other current liabilities |
4 |
|
Total liabilities acquired |
4 |
|
Net assets acquired |
$ |
140 |
|
______________________
|
|
(a) |
Goodwill is expected to be deductible for tax purposes. |
(b)
Franchise agreements have a weighted average life of 25 years.
|