Due to Shareholders of Acquired Companies

12 Months Ended

Dec. 31, 2018

Due to Shareholders of Acquired Companies

Acquisitions

Included in the discussion below are transactions involving entities in Continuing Operations and Discontinued Operations.

2018 Acquisition

Peru

On November 5, 2018, Laureate Education Peru, SRL, an indirect wholly owned subsidiary of the Company, acquired all of the capital stock of Instituto de Educación Superior Tecnológico Privado Red Avansys SAC (Avansys), an institution in Peru, for a total purchase price of approximately 63,000 Peruvian Nuevo Sols (approximately US $18,900 at the acquisition date), plus debt assumed. The cash paid at acquisition, net of cash acquired, was $17,019. We accounted for this acquisition as a business combination. For this acquisition, Revenues, Operating income and Net income attributable to Laureate Education, Inc. were immaterial for the year ended December 31, 2018.

The following table summarizes the estimated fair value of all assets acquired and the liabilities assumed at the date of acquisition:



	Avansys Peru
Current assets	$	3,921
Property and equipment	13,673
Goodwill	4,658
Other long-term assets	815
Total assets acquired	23,067
Current portion of long-term debt	874
Other current liabilities	3,332
Total liabilities	4,206
Net assets acquired attributable to Laureate Education, Inc.	18,861
Debt assumed	874
Net assets acquired attributable to Laureate Education, Inc. plus debt assumed	$	19,735

Net assets acquired	$	18,861
Cash acquired	(1,842		)
Net cash paid at acquisition	$	17,019

2018 Summary

The amounts recorded for the 2018 acquisition are provisional as Laureate is in the process of finalizing amounts for the valuation of property and equipment. None of the goodwill related to the 2018 acquisition is expected to be deductible for income tax purposes. Pro forma results of operations have not been presented because the effects of the acquisition were not material to the Company’s financial results.

2017 Acquisition

During the year ended December 31, 2018, Laureate consummated the business acquisition outlined below, which is included in our Consolidated Financial Statements commencing from the date of acquisition.

Australia

In June 2017, our Rest of World segment acquired the assets and business of the nursing division of Careers Australia (CA Nursing), a vocational institution in Australia, for a cash purchase price of Australian Dollar (AUD) 1,107 (US $835 at the date of acquisition) plus debt assumed of AUD 9,850 (US $7,433 at the acquisition date). We accounted for this acquisition as a business combination. For this acquisition, Revenues, Operating income and Net income attributable to Laureate Education, Inc. were immaterial for the year ended December 31, 2017.

The following table summarizes the estimated fair value of all assets acquired and the liabilities assumed at the date of acquisition:



	CA Nursing Australia
Current assets	$	2,552
Property and equipment	9,581
Goodwill	3,584
Other intangible assets	3,293
Total assets acquired	19,010
Current portion of long-term debt	166
Other current liabilities	8,997
Long-term debt, less current portion	7,267
Other long-term liabilities	1,745
Total liabilities	18,175
Net assets acquired attributable to Laureate Education, Inc.	835
Debt assumed	7,433
Net assets acquired attributable to Laureate Education, Inc. plus debt assumed	$	8,268

Net assets acquired	$	835
Net cash paid at acquisition	$	835

2017 Summary

The amounts recorded for the 2017 acquisition are considered final. None of the goodwill related to the 2017 acquisition is expected to be deductible for income tax purposes. Pro forma results of operations for the acquisition completed during 2017 have not been presented because the effects of that acquisition were not material to the Company’s financial results.

2016 Transactions

University of St. Augustine for Health Sciences, LLC (St. Augustine)

On March 24, 2016, the noncontrolling interest holders of St. Augustine notified Laureate of their election to exercise their put option, which required Laureate to purchase the remaining noncontrolling interest of 20%. Accordingly, this noncontrolling interest became a mandatorily redeemable financial instrument on the put option exercise date and was recognized as a liability at its estimated redemption value in accordance with ASC 480, "Distinguishing Liabilities from Equity." Under the terms of the agreement, the put option purchase price is based on 7.0 times Adjusted EBITDA of St. Augustine, as defined in the agreement, for the twelve months ended as of the last day of the fiscal quarter most recently ended prior to the date on which notice of exercise is given multiplied by the percentage interest being acquired. In June 2016, we acquired the remaining 20% noncontrolling interest in St. Augustine for a purchase price of $24,997. This payment was included in Payments to purchase noncontrolling interests in the Consolidated Statement of Cash Flows.

Uni IBMR

In 2015, we entered into a commitment to purchase the remaining 10% minority interest in Uni IBMR for a purchase price of BRL 2,500. The agreement closed on March 10, 2016 and we paid BRL 2,500 (US $668 at the payment date), which was included in Payments to purchase noncontrolling interests in the Consolidated Statement of Cash Flows.

Due to Shareholders of Acquired Companies

The amounts due to shareholders of acquired companies generally arise in connection with Laureate’s acquisition of a majority or all of the ownership interest of these companies. Promissory notes payable to the sellers of acquired companies, referred to as “seller notes,” are commonly used as a means of payment for business acquisitions. Seller note payments are classified as Payments of deferred purchase price for acquisitions within financing activities in our Consolidated Statements of Cash Flows. The amounts due to shareholders of acquired companies, currencies, and interest rates applied were as follows:



	December 31, 2018		December 31, 2017		Nominal Currency	Interest Rate %
Universidade Anhembi Morumbi (UAM Brazil)	$	30,912	$	45,206	BRL	CDI + 2%
University of St. Augustine for Health Sciences, LLC (St. Augustine)	11,395		11,550		USD	7%
Faculdade Porto-Alegrense (FAPA)	1,943		3,084		BRL	IGP-M
IADE Group	1,141		2,374		EUR	3%
Monash South Africa (MSA)	—		9,571		AUD	n/a
Total due to shareholders of acquired companies	45,391		71,785
Less: Current portion of due to shareholders of acquired companies	23,820		34,745
Due to shareholders of acquired companies, less current portion	$	21,571	$	37,040



BRL: Brazilian Real		CDI: Certificados de Depósitos Interbancários (Brazil)
USD: United States Dollar		IGP-M: General Index of Market Prices (Brazil)
EUR: European Euro
AUD: Australian Dollar

The aggregate maturities of Due to shareholders of acquired companies as of December 31, 2018, were as follows:



2019	$	24,488
2020	12,242
2021	11,101
2022	—
2023	—
Aggregate maturities	47,831
Less: imputed interest discount	(2,440		)
Total	$	45,391

UAM Brazil

A portion of the acquisition was financed with a seller note in the amount of BRL 200,808 (US $51,703 at December 31, 2018), which is scheduled to be paid in nine equal installments of BRL 22,312 (US $5,745 at December 31, 2018), adjusted for inflation based on CDI plus 200 basis points. The initial six installments were paid during the years ended December 31, 2013 through 2018. The remaining three installments are due annually on August 31st of each year. The eighth and ninth installments were subject to an accelerated due date of August 31, 2019, along with the seventh installment, if a certain financial performance target was achieved in 2018, as described in the purchase agreement; however, this performance target was not achieved and the installments will maintain their original due dates. On the acquisition date we recorded the note payable at its discounted present value, which will be accreted over the term of the note. As of December 31, 2018, the carrying value of the note was $30,912.

St. Augustine

On November 21, 2013, Laureate initially acquired 80% of the ownership and voting rights of St. Augustine. A portion of the purchase price was financed with a five-year seller note in the amount of $14,000. The promissory note incurred interest at an annual rate of 7%, which was payable quarterly beginning on January 1, 2014, and the entire principal balance was payable on November 21, 2018. During 2015 this note payable and a receivable from the former owner were reduced by $2,450 following the resolution of certain pre-acquisition matters, leaving a principal balance of $11,550. In 2016, Laureate acquired the remaining 20% noncontrolling interest in St. Augustine, as discussed in Note 5, Acquisitions. In November 2018, Laureate sent a notice to the former owner, notifying them of our contractual right under the purchase agreement to withhold payment on the remaining principal balance until there is resolution of certain pending legal matters for which the Company is indemnified by the former owner. Laureate has a contractual right under the purchase agreement to offset any obligations that may result from the pending legal matters against the remaining principal balance of the note payable, and is indemnified by the former owner should such obligations exceed the remaining principal balance of the note payable. Laureate does not expect the resolution of these matters to have a material impact on its Consolidated Financial Statements. In connection with these legal matters, Laureate incurred and paid legal fees of $155 during 2018 which were offset against the note payable, leaving a remaining principal balance of $11,395. Although St. Augustine is included in Discontinued Operations, this promissory note is the legal obligation of a corporate entity, and therefore is included in Continuing Operations and will remain subsequent to the sale of St. Augustine.

MSA

During the second quarter of 2018, the conditions required for resolution of the MSA earnout were completed and the seller note liability, which was recorded on a corporate entity, was reversed as the criteria for payment was not met.

FMU

At the acquisition date of FMU on September 12, 2014, Laureate financed a portion of the purchase price with promissory notes payable to the seller of BRL 250,000. These seller notes matured on September 12, 2017 and the principal and interest were fully repaid in the amount of BRL 358,606 (US $114,578 at the date of payment). The interest portion was classified in operating cash flows and included in the $39,419 of Interest paid on deferred purchase price for acquisitions on the Consolidated Statements of Cash Flows.