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REDEEMABLE NON-CONTROLLING INTEREST |
15. REDEEMABLE NON-CONTROLLING INTEREST
On January 2, 2014, the Company acquired a 60% ownership interest in BrandLoyalty. Pursuant to the BrandLoyalty share purchase agreement, the Company may acquire the remaining 40% ownership interest in BrandLoyalty over a four-year period from the acquisition date at 10% per year at predetermined valuation multiples. If specified annual earnings targets are met by BrandLoyalty, the Company must acquire the additional 10% ownership interest for the year achieved; otherwise, the sellers have a put option to sell the Company their 10% ownership interest for the respective year.
The specified annual earnings target was met for the year ended December 31, 2014 and the Company acquired an additional 10% ownership interest effective January 1, 2015, increasing its ownership percentage to 70%. The Company paid €77.2 million on February 10, 2015 ($87.4 million) to acquire this additional 10% ownership interest. The remaining 30% interests held by minority interest shareholders are considered redeemable non-controlling interests, as the acquisition of these interests is outside of the Company’s control.
As of December 31, 2015, the remaining interests are not redeemable, but are probable to be redeemed. As such, the Company adjusted the carrying amount of the redeemable non-controlling interest to the estimated redemption value assuming the interests were redeemable as of December 31, 2015. The estimated redemption values are based on a formula as prescribed in the BrandLoyalty share purchase agreement.
On the acquisition date, the Company recognized a redeemable non-controlling interest in the amount of $341.9 million, which was measured at fair value at the acquisition date. A reconciliation of the changes in the redeemable non-controlling interest is as follows:
As of December 31, 2015, BrandLoyalty met the specified annual earnings target and the Company was obligated to acquire an additional 10% ownership interest, bringing the Company’s ownership interest in BrandLoyalty to 80%, effective January 1, 2016. The Company recorded a liability of $98.9 million (€91.1 million on December 31, 2015) for the acquisition of the additional 10% ownership interest, included in accrued expenses in the December 31, 2015 consolidated balance sheet. In February 2016, the Company paid €91.1 million for the acquisition of the Company’s additional 10% ownership interest in BrandLoyalty that was effective on January 1, 2016 ($102.0 million on February 8, 2016).
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