Business Combinations

9 Months Ended

Dec. 31, 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 certain immaterial 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 December 31, 2021, we recorded an immaterial purchase accounting adjustment related to an acquired tax liability, which resulted in a $6 million decrease 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.

The following table summarizes the 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	526
Goodwill	1,506
Deferred tax liabilities	(38)
Current liabilities	(78)
Other liabilities	(39)
Purchase price, net of cash acquired	$	2,002

Intangibles assets by asset category(a)
Developed and core technology	$	232
Trade names and trademarks	209
Registered user base and other intangibles	12
In-process research and development	73
Total	$	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.

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.

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 during the six months ended September 30, 2021.

The fair values assigned to assets acquired and liabilities assumed are based on management's best estimates and assumptions. Our purchase accounting is preliminary as of the reporting date, pending finalization of the valuation of acquired intangible assets, including associated deferred tax impacts, tangible assets, and assumed liabilities. We expect to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date, and do not expect material purchase accounting adjustments in future periods.

During the three months ended December 31, 2021, we recorded a preliminary net working capital adjustment, which resulted in a $4 million decrease to the purchase price, net of cash acquired and adjusted the fair values assigned to the Playdemic assets acquired and liabilities assumed. The differences between the provisional estimates recognized during the second quarter of fiscal 2022 and the adjusted preliminary amounts are presented in the table below:


(In millions)	Previously Reported at September 30, 2021		Measurement Period Adjustments		As Adjusted at December 31, 2021
Current assets	$	22	$	(5)	$	17
Property and equipment, net	2		—		2
Other assets	2		1		3
Intangible assets	354		77		431
Goodwill	1,100		(64)		1,036
Deferred tax liabilities	(67)		(15)		(82)
Current liabilities	(6)		2		(4)
Other liabilities	(2)		—		(2)
Purchase price, net of cash acquired	$	1,405	$	(4)	$	1,401

Intangibles assets by asset category(b)
Developed and core technology					$	174
Trade names and trademarks					219
Registered user base and other intangibles					38
Total					$	431
(b) We currently estimate the weighted-average useful life of Playdemic’s acquired intangible assets to be approximately 6.6 years.

The measurement period adjustments would not have had a material impact on the Condensed Consolidated Statements of Operations in the second 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 local tax purposes.

The results of operations of Playdemic and the preliminary fair value of the assets acquired have been included in our Condensed Consolidated Financial Statements.

Additional Acquisition Related Information

During the nine months ended December 31, 2021, we completed one other acquisition that was not material to our Condensed Consolidated Financial Statements.

Pro forma results of operations of our acquisitions have not been presented because the effect of the acquisitions were not material to our Condensed Consolidated Statements of Operations individually, and in the aggregate.