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Acquisitions (Notes)
12 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
Acquisitions
The Company’s consolidated financial statements include the operating results of the acquired businesses from the dates of acquisition.
Acquisitions in Fiscal 2018
PayCommerce Financial Solutions, LLC
On September 5, 2018, the Company acquired all of the outstanding membership interests of PayCommerce Financial Solutions, LLC (“PCFS”). Subsequent to the acquisition, the Company renamed PCFS to INTL Technology Services, LLC (“ITS”). ITS is a fully accredited SWIFT Service Bureau provider. This acquisition enables the Company to act as a SWIFT Service Bureau for its 300-plus correspondent banking network, thus providing another important service for delivering local currency, cross-border payments to the developing world. The purchase price was approximately $3.8 million of cash consideration. The purchase price allocation resulted in $0.7 million in receivables, $0.8 million in property, plant, and equipment, $0.5 million in equity investments, and $2.2 million in liabilities assumed. Additionally, the Company acquired identifiable, definite lived client relationship and client list assets that have been assigned a fair value of $1.3 million and a useful life of 5 years. The fair value of the consideration transferred exceeded the fair value of identifiable assets acquired and liabilities assumed. The excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets acquired of $2.6 million was recorded as goodwill. Management believes that the goodwill represents the synergies expected from the incremental revenue that can be realized from combining the technologies acquired with the Company’s pre-existing correspondent banking network. The estimated fair value assigned to the tangible assets, identifiable intangible assets, and assumed liabilities were based on management’s estimates and assumptions.
This business has been included within the Company’s Global Payments Segment. The Company’s consolidated income statement for the year ended September 30, 2018 includes the post-acquisition results of ITS, which was immaterial in relation to the Company’s consolidated results.
Carl Kliem S.A.
On June 12, 2018, the Company executed a sale and purchase agreement to acquire the entire issued and outstanding share capital of Carl Kliem S.A. Carl Kliem S.A. is an independent interdealer broker based in Luxembourg, a leading European financial hub, which provides foreign exchange, interest rate and fixed income products to a diverse, institutional client base across the European Union. Carl Kliem S.A. employs approximately 40 people and has over 400 active institutional clients. This acquisition is expected to provide the Company with a strong European client base and a European Union based footprint following the completion of Brexit. The closing of the agreement was conditional upon approval of the Luxembourg financial sector supervisory authority, the Commission de Surveillance du Secteur Financier (“CSSF”). In November 2018, the Company received regulatory approval from the CSSF to complete the acquisition and the acquisition closed effective November 30, 2018. The purchase price is equal to the net tangible book value on the closing date minus restructuring costs and is not material to the Company. The initial accounting for the purchase price allocation is not yet complete.
Acquisition in Fiscal 2017
ICAP’s EMEA Oils Broking Business
Effective October 1, 2016, the Company’s subsidiary, INTL FCStone Ltd acquired the London-based EMEA oils business of ICAP Plc. The business included more than 30 front office employees across the fuel, crude, middle distillates, futures and options desks that have relationships with more than 200 commercial and institutional clients throughout Europe, the Middle East and Africa. The terms of the agreement included cash consideration of $6.0 million paid directly to ICAP as well as incentive amounts payable to employees acquired based upon their continued employment. The cash consideration paid to ICAP was dependent upon the number of brokers who accepted INTL FCStone Ltd’s employment offer. The transaction was accounted for as an asset acquisition in accordance with FASB ASC 805-50 and FASB ASC 350. The cash consideration paid was allocated entirely to the intangible asset recognized related to the client base acquired. The intangible asset was assigned to the Clearing and Execution Services segment and will be amortized over a useful life of 5 years.
Acquisition in Fiscal 2016
Sterne Agee
Effective July 1, 2016, the Company acquired all of the equity interests of Sterne Agee, LLC’s (a wholly-owned subsidiary of Stifel Financial Corp.) legacy independent brokerage and clearing businesses, Sterne Agee & Leach, Inc.; Sterne Agee Clearing, Inc.; Sterne Agee Financial Services, Inc. Effective August 1, 2016, the Company acquired all of the equity interests of Sterne Agee, LLC’s legacy Registered Investment Advisor (“RIA”) business, Sterne Agee Asset Management, Inc. and Sterne Agee Investment Advisor Services, Inc. - collectively (“Sterne Agee”) for cash consideration. Effective July 1, 2017, Sterne Agee & Leach, Inc. was merged into the Company’s wholly-owned regulated U.S. subsidiary, INTL FCStone Financial. Additionally, during 2017, Sterne Agee Clearing, Inc., Sterne Agee Financial Services, Inc., Sterne Agee Asset Management, Inc., and Sterne Agee Investment Advisor Services, Inc. were renamed INTL Custody & Clearing Solutions, Inc., SA Stone Wealth Management, Inc., INTL Advisory Consultants, Inc., and SA Stone Investment Advisors, Inc., respectively.
The acquisition-date fair value of the consideration transferred totaled $45.0 million. The purchase price allocation resulted in $24.9 million in cash, $151.6 million in receivables, $5.7 million in deferred tax assets, $4.8 million in other assets and $136.0 million in liabilities assumed. The fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, the Company recognized a gain of $6.2 million for the year ended September 30, 2016, which is included in the line item ‘Other gains’ in the consolidated income statement. The Company believes the transaction resulted in a gain primarily due to the Company’s ability to incorporate these business activities into its existing business structure, and its ability to utilize certain deferred tax assets and other assets while operating the business that may not have been likely to be realized by the seller. There were no purchase price adjustments recorded during the measurement period and the purchase price allocation is now considered final.
The businesses have been included within the Company’s Clearing and Execution Services Segment. The Company’s consolidated income statement for the year ended September 30, 2016 includes the post-acquisition results of the Sterne Agee businesses, which were immaterial. The acquired businesses contributed net operating revenues of $8.6 million and net loss of $0.1 million to the Company for the period from July 1, 2016 to September 30, 2016.