Business Combinations

3 Months Ended

Jun. 30, 2021

Business Combination Disclosure [Text Block]

(6) BUSINESS COMBINATIONS

Codemasters Group Holdings plc

On February 18, 2021, we completed our acquisition of 100% of the equity interests of Codemasters Group Holdings plc, a public limited company registered in England and Wales (“Codemasters”), for a total purchase price of $1.2 billion, net of cash acquired. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions, and are considered preliminary as of the reporting date pending finalization of the valuation of deferred tax assets, tax liabilities, and payroll tax liabilities. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. During the three months ended June 30, 2021, we recorded a $31 million decrease to the acquisition date fair values of certain deferred tax liabilities, which resulted in a reduction to goodwill.

Glu Mobile Inc.

On April 29, 2021, we completed the acquisition of 100% of the equity interests of Glu Mobile Inc., a leading global developer and publisher of mobile games (“Glu” and the “Glu acquisition”) for a total purchase price of $2.0 billion, net of cash acquired of $332 million. The acquisition of Glu is expected to accelerate our mobile growth by creating a combined organization with ongoing live services across multiple games and genres. We also believe that the acquisition will create value by adding Glu’s expertise in casual sports and lifestyle genres to new titles based on our intellectual property. The transaction costs associated with the acquisition totaled approximately $15 million and were recognized in general and administrative expense, of which $11 million were recognized during the three months ended June 30, 2021.

In addition, upon the closing of the Glu acquisition, we assumed all outstanding unvested options and unvested restricted stock units relating to Glu common stock and such awards were converted into corresponding awards relating to a number of shares of our common stock using an exchange ratio equal to 0.0880, with substantially identical terms and conditions as were applicable to the corresponding Glu awards immediately prior to the closing of the acquisition, except as such terms and conditions were modified in the acquisition agreements (“Replacement Awards”). The estimated fair value of the Replacement Awards was $133 million, of which $23 million related to awards for which services were rendered prior to the Glu acquisition and represented part of the purchase consideration transferred in the Glu acquisition. The remaining $110 million is attributable to services to be rendered after the Glu acquisition and will be recognized as stock-based compensation expense over their remaining vesting periods.

The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:


(In millions)
Current assets	$	63
Property and equipment, net	14
Other assets	48
Intangible assets	657
Goodwill	1,406
Deferred tax liabilities	(69)
Current liabilities	(78)
Other liabilities	(39)
Purchase price, net of cash acquired	$	2,002

The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of the valuation analyses pertaining to assets acquired and liabilities assumed, which primarily relate to acquired intangible assets. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

We recognized goodwill of $1,406 million, which consists largely of workforce and synergies with our existing business. The goodwill is not deductible for tax purposes.

The results of operations of Glu and the preliminary fair value of the assets acquired have been included in our Condensed Consolidated Financial Statements since the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to our Condensed Consolidated Statements of Operations.

During the three months ended June 30, 2021, we completed one other acquisition that was not material to our Condensed Consolidated Financial Statements.

Pending Acquisition of Playdemic

On June 23, 2021, we announced that we entered into a share purchase agreement to acquire Playdemic Limited, a private limited company incorporated in England and Wales (“Playdemic”), (the “Playdemic acquisition”) for $1.4 billion in cash, subject to customary purchase price adjustments. Under the terms of the agreement, the completion of the acquisition is subject to a customary closing condition regarding the receipt of applicable regulatory clearances. The acquisition of Playdemic is part of our mobile growth strategy and the acquisition will add to our mobile portfolio. The Playdemic acquisition is expected to close in fiscal year 2022. We intend to fund this acquisition with existing cash on hand.