Business Combinations

6 Months Ended

Sep. 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 September 30, 2021, we recorded a $5 million net tax liability, which resulted in an increase 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 fiscal 2022, all within 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.

During the three months ended September 30, 2021, we finalized the fair values assigned to the Glu assets acquired and liabilities assumed. The differences between the preliminary estimates recognized during the first quarter of fiscal 2022 and the final amounts are presented in the table below:


(In millions)	Previously Reported at June 30, 2021		Measurement Period Adjustments		As Adjusted at September 30, 2021
Current assets	$	63	$	—	$	63
Property and equipment, net	14		—		14
Other assets	48		—		48
Intangible assets	657		(131)		526
Goodwill	1,406		100		1,506
Deferred tax liabilities	(69)		31		(38)
Current liabilities	(78)		—		(78)
Other liabilities	(39)		—		(39)
Purchase price, net of cash acquired	$	2,002	$	—	$	2,002

Intangibles assets by asset category(a)
Developed and core technology	$	305	$	(73)	$	232
Trade names and trademarks	252		(43)		209
Registered user base and other intangibles	12		—		12
In-process research and development	88		(15)		73
Total	$	657	$	(131)	$	526
(a) In-process research and development assets are considered indefinite-lived until complete. Excluding the in-process research and development assets, the weighted-average useful life of the Glu’s acquired intangible assets is currently estimated to be approximately 5.5 years.

The measurement period adjustments would not have had a material impact on the Condensed Consolidated Statements of Operations in the first quarter of fiscal 2022 had the adjustments to the provisional amounts been recognized as of the acquisition date.

Goodwill 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 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.

Playdemic Limited

On September 20, 2021, we completed the acquisition of 100% of the equity interests of Playdemic Limited, a private limited company incorporated in England and Wales (“Playdemic” and the “Playdemic acquisition”) for a total purchase price of $1.4 billion, net of cash acquired. The Playdemic acquisition is intended to be another step in our strategy of continued leadership in sports and mobile expansion. The transaction costs associated with the acquisition totaled approximately $11 million and were recognized in general and administrative expense, of which $8 million were recognized during the three months ended September 30, 2021.

Due to the proximity of the closing date of the Playdemic acquisition to the balance sheet date of September 30, 2021, the initial purchase accounting is incomplete and subject to change during the measurement period, which may result in material changes to our purchase price allocation. We expect to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date.

The following table summarizes the provisional allocation of the purchase price to the fair value of assets acquired and liabilities assumed based on management’s best estimates as of the reporting date:


(In millions)
Current assets	$	22
Property and equipment, net	2
Other assets	2
Intangible assets	354
Goodwill	1,100
Deferred tax liabilities	(67)
Current liabilities	(6)
Other liabilities	(2)
Purchase price, net of cash acquired	$	1,405

To develop our provisional fair values of assets acquired and liabilities assumed, we utilized currently available information and fair value allocation benchmarks from similar completed transactions. We are currently in the process of completing our purchase accounting; including, but not limited to, completing a valuation of acquired intangible assets and valuation of deferred tax assets, tax liabilities, and payroll tax liabilities.

Goodwill consists largely of workforce and synergies with our existing business. The goodwill is not deductible for local tax purposes.

The results of operations during the three months ended September 30, 2021 for Playdemic are not material to our Condensed Consolidated Financial Statements. 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 six months ended September 30, 2021, we completed one other acquisition that was not material to our Condensed Consolidated Financial Statements.