14. Redeemable Noncontrolling Interest

As a result of the Company’s acquisition of additional outstanding shares of Laser Quantum from the remaining shareholders on January 10, 2017, the Company increased its ownership position in Laser Quantum from approximately 41% to approximately 76% and began to consolidate the operating results of Laser Quantum in the consolidated financial statements. As part of the purchase agreement, the Company and the remaining equity holders entered into a call and put option agreement for the purchase and sale, in 2020, of all remaining Laser Quantum shares held by the remaining equity holders, subject to certain conditions. The purchase price for the remaining shares will be based on the noncontrolling interest’s portion of cash on hand and a multiple of Laser Quantum’s EBITDA for the twelve months ending December 31, 2019, as defined in the call and put option agreement. As a result of the put option, the noncontrolling interest is considered a redeemable equity instrument and is presented as temporary equity on the consolidated balance sheet. The proportionate share of the net income from Laser Quantum attributable to the noncontrolling interest has been reported as a reduction to the consolidated net income in the Company’s consolidated statements of operations and an increase to the carrying value of the redeemable noncontrolling interest.

The initial value of the noncontrolling interest of £17.7 million ($21.6 million) was measured at fair value at the date of the acquisition and will be adjusted to its redemption value on a quarterly basis, to the extent that the redemption value exceeds the carrying value of the noncontrolling interest. The value of the noncontrolling interest was determined using a combination of the discounted cash flow method (an income approach), the guideline public company method (a market approach), and the subject company transaction method (a market approach). The Company carries the redeemable noncontrolling interest at the higher of (i) the carrying value without any redemption value adjustments or (ii) the estimated redemption value as of the end of the reporting period. The estimated redemption value is determined as of the end of the reporting period as if it were also the redemption date for the instrument. The resulting adjustments are recorded in retained earnings and do not affect the consolidated statement of operations. During the three months ended June 30, 2017, the Company increased the carrying amount of the redeemable noncontrolling interest by $3.7 million to reflect the estimated redemption value as of June 30, 2017.

The following table presents the reconciliation of changes in the Company’s noncontrolling interest:

	Redeemable noncontrolling interest
Balance as of December 31, 2016	$	—
Acquisition of noncontrolling interest		21,582
Net income attributable to noncontrolling interest		610
Adjustment of redeemable noncontrolling interest to estimated redemption value ⁽¹⁾		3,718
Foreign currency translation		1,448
Balance as of June 30, 2017	$	27,358

(1)

Adjustment of the carrying value of redeemable noncontrolling interest to the estimated redemption value was recognized in retained earnings instead of the consolidated statement of operations but was included in the computation of earnings per share attributable to Novanta Inc. (see Note 5.)