Broadridge Financial Solutions (BR) 8-KOther Events

The following unaudited pro forma condensed combined financial statements give effect to the proposed acquisition (the “Acquisition”) of Itiviti Holdings AB and its subsidiaries (“Itiviti”) by Broadridge Financial Solutions, Inc. (“Broadridge” or the “Company”) and were prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”). The Acquisition is subject to customary closing conditions and regulatory approval and is expected to close in the fourth quarter of fiscal year 2021. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 assumes that the closing of the Acquisition (the “Closing”) took place on March 31, 2021 and combines the historical balance sheets of Broadridge as of March 31, 2021 and Itiviti as of December 31, 2020. The unaudited pro forma condensed combined statement of earnings for the nine months ended March 31, 2021 and for the year ended June 30, 2020 assume that the Closing took place as of July 1, 2019. Broadridge’s fiscal year end is June 30 while Itiviti’s fiscal year end is December 31. Therefore, we have prepared Itiviti’s statements of earnings for the twelve month period ended June 30, 2020 and for the nine month period ended December 31, 2020 for purposes of combining with the Broadridge statements of earnings for the twelve month period ended June 30, 2020 and for the nine month period ended March 31, 2021, and have used Itiviti’s balance sheet at December 31, 2020 to combine with the historical balance sheet of Broadridge at March 31, 2021 for purposes of preparing the unaudited pro forma condensed combined balance sheet as of March 31, 2021. The Itiviti historical condensed statement of earnings for the twelve months ended June 30, 2020 and the nine months ended December 31, 2020 include an overlap of revenues of approximately $56.6 million and net earnings attributable to the parent company's shareholders of approximately $17.0 million for the period of April 1, 2020 through June 30, 2020, using a Euro to U.S. dollar exchange rate of $1.09438.

The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X, in accordance with SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses. The historical financial information of Broadridge are reported pursuant to accounting principles generally accepted in the United States (“U.S. GAAP”) and are presented in U.S. dollars (“USD”), while the historical financial information of Itiviti are reported pursuant to International Financial Reporting Standards (“IFRS”) and are presented in Euros (“EUR”). Accordingly, the unaudited pro forma condensed combined financial statements give effect to the Acquisition and include adjustments for the following:

The pro forma financial information reflects transaction accounting adjustments management believes are necessary to present fairly Broadridge’s pro forma results of operations and financial position following the Closing as of and for the periods indicated. The transaction accounting adjustments are based on currently available information and assumptions Broadridge management believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report Broadridge’s financial condition and results of operations as if the Acquisition was completed on the assumed dates.

The following unaudited pro forma condensed combined financial statements and related notes are based on and should be read in conjunction with (i) the historical unaudited consolidated financial statements of Broadridge and related notes included in Broadridge’s Quarterly Report on Form 10-Q for the period ended March 31, 2021, (ii) the historical audited consolidated financial statements of Broadridge and the related notes included in Broadridge’s Annual Report on Form 10-K for the year ended June 30, 2020, and (iii) the historical audited consolidated financial statements of Itiviti and the related notes included in Itiviti’s Annual Report for the year ended December 31, 2020, which financial statements are filed as Exhibit 99.1 to this Current Report on Form 8-K. 

The statements and related notes are being provided for illustrative purposes only and do not purport to represent what the combined company’s actual results of operations or financial position would have been had the Acquisition been completed on the dates indicated, nor are they necessarily indicative of the combined company’s future results of operations or financial position for any future period.

Broadridge intends to complete the valuations and other studies upon completion of the Acquisition and will finalize the allocation of consideration as soon as practicable, but in no event later than one year following the Closing. The assets and liabilities of Itiviti have been measured based on various preliminary estimates using assumptions that Broadridge believes are reasonable based on information that is currently available. Broadridge estimated the fair value of Itiviti's assets and liabilities based on a preliminary valuation analysis, due diligence information, information presented in Itiviti's audited and unaudited financial statements and other available information. Following completion of the Acquisition, a final determination of the fair value of Itiviti's assets acquired and liabilities assumed will be performed. Any changes in the fair values of the net assets or total purchase consideration as compared with the information shown in the unaudited pro forma condensed combined financial statements may change the amount of the total purchase consideration allocated to goodwill and other assets and liabilities and may impact the combined company statement of earnings. The final purchase consideration allocation may be materially different than the preliminary purchase consideration allocation presented in the unaudited pro forma condensed combined financial statements. Accordingly, the transaction accounting adjustments are preliminary and have been made solely for the purpose of providing pro forma financial statements prepared in accordance with Article 11 of Regulation S-X. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying pro forma financial statements and the combined company’s future results of operations and financial position.

Upon completion of the Acquisition, Broadridge will perform a detailed review of Itiviti’s accounting policies. As a result of that review, Broadridge may identify differences between the accounting policies of Broadridge and Itiviti that, when conformed, could have a material impact on the consolidated financial statements of the combined company. At this time, Broadridge is not aware of any significant accounting policy differences. The pro forma financial statements do not reflect any cost or growth synergies that the combined company may achieve as a result of the Acquisition, or the costs to combine the operations of Broadridge and Itiviti, or the costs necessary to achieve these cost or growth synergies. Further, there were no material intercompany transactions and balances between Broadridge and Itiviti as of and for the nine months ended March 31, 2021 and for the year ended June 30, 2020. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed.

Amounts may not sum due to rounding.

On March 27, 2021, Broadridge and its wholly-owned subsidiary Broadridge Sweden Holdings AB, a company incorporated under the laws of Sweden (“BR Holdings”), entered into a share purchase agreement (the “Share Purchase Agreement”) with Cidron Delfi S.À R.L., Itiviti Invest V AB, Itiviti Intressenter AB and the individuals named therein (collectively, the “Sellers”) pursuant to which Broadridge will acquire Itiviti.

In connection with the Acquisition, Broadridge entered into the Fiscal 2021 Term Credit Agreement providing for term loan commitments in an aggregate principal amount of $2.55 billion for the purpose of funding the Acquisition. The Fiscal 2021 Term Credit Agreement consists of a $1.0 billion tranche that matures 18 months after the date on which such Fiscal 2021 Term Credit Agreement loans are borrowed (the “Funding Date”) and a $1.55 billion tranche that matures on the third anniversary of the Funding Date. Refer to Note 3 for a summary of the impact the financing arrangements are expected to have on Broadridge’s debt balances and refer to Note 4 for details on the impact these financing arrangements are expected to have on the unaudited pro forma condensed combined statements of earnings.

The accompanying unaudited pro forma condensed combined balance sheet as of March 31, 2021 combines the historical consolidated balance sheets of Broadridge and Itiviti, giving effect to the Acquisition as if it had been completed on March 31, 2021. The unaudited pro forma condensed combined statements of earnings for the nine months ended March 31, 2021 and for the year ended June 30, 2020 combine the historical consolidated statements of earnings of Broadridge and Itiviti, giving effect to the Acquisition as if it had been completed on July 1, 2019. Broadridge’s fiscal year end is June 30 while Itiviti’s fiscal year end is December 31. Therefore, we have prepared Itiviti’s statements of earnings for the twelve month period ended June 30, 2020 and for the nine month period ended December 31, 2020 for purposes of combining with the Broadridge statements of earnings and have used Itiviti’s balance sheet at December 31, 2020 to combine with the historical balance sheet of Broadridge at March 31, 2021 for purposes of preparing the unaudited pro forma condensed combined balance sheet as of March 31, 2021.

The historical financial information of Broadridge are reported pursuant to U.S. GAAP and are presented in USD, while the historical financial information of Itiviti are reported pursuant to IFRS and are presented in EUR. As discussed in Note 5, certain adjustments and reclassifications have been made to conform the historical financial information of Itiviti from IFRS to U.S. GAAP and to translate the financial statements from EUR to USD. Upon completion of the Acquisition, Broadridge will perform a detailed review of Itiviti’s accounting policies. As a result of that review, Broadridge may identify differences between the accounting policies of Broadridge and Itiviti that, when conformed, could have a material impact on the consolidated financial statements of the combined company. At this time, Broadridge is not aware of any significant accounting policy differences. The pro forma financial statements do not reflect any cost or growth synergies that the combined company may achieve as a result of the Acquisition, or the costs to combine the operations of Broadridge and Itiviti, or the costs necessary to achieve these cost or growth synergies. Further, there were no material intercompany transactions and balances between Broadridge and Itiviti as of and for the nine months ended March 31, 2021 and for the year ended June 30, 2020.

The accompanying unaudited pro forma condensed combined financial statements and related notes were prepared using the acquisition method of accounting under the provisions of ASC 805, with Broadridge considered the acquirer of Itiviti. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed combined balance sheet, the purchase consideration has been allocated to the assets acquired and liabilities assumed of Itiviti based upon management’s preliminary estimate of their fair values as of March 31, 2021. Broadridge intends to complete the valuations and other studies upon completion of the Acquisition and will finalize the allocation of consideration as soon as practicable, but in no event later than one year following the closing date of the Acquisition. The assets and liabilities of Itiviti have been measured based on various preliminary estimates using assumptions that Broadridge believes are reasonable based on information that is currently available. Accordingly, the transaction accounting adjustments are preliminary and have been made solely for the purpose of providing pro forma financial statements prepared in accordance with Article 11 of Regulation S-X. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying pro forma financial statements and the combined company’s future results of operations and financial position. The nine months ended March 31, 2021 statement of earnings include Broadridge acquisition costs of approximately $9.0 million and related tax impact of approximately $0.1 million. 

All amounts presented within these Notes to the Unaudited Pro Forma Condensed Combined Financial Statements are in millions, except per share data.

The estimated total cash purchase consideration to acquire Itiviti is $2,604.1 million as of April 30, 2021, excluding cash acquired, and is payable in a combination of currencies. The estimated total purchase consideration is subject to customary closing adjustments and includes payments to both the equity holders of Itiviti as well as to the holders of Itiviti’s outstanding debt obligations. The Closing estimated purchase price in EUR and Swedish Krona (“SEK”) has been converted at the EUR to USD exchange rate of $1.20724 and SEK to USD exchange rate of $0.11874 as of April 30, 2021. At constant EUR to USD and SEK to USD exchange rates, a 10% increase/decrease in the exchange rates would result in an approximate $237 million increase/decrease in goodwill.

The preliminary estimated Acquisition consideration as shown in the table above is allocated to the tangible and intangible assets acquired and liabilities assumed of Itiviti based on their preliminary estimated fair values. As mentioned above in Note 1, Broadridge intends to complete the valuations and other studies upon completion of the Acquisition and will finalize the allocation of consideration as soon as practicable, but in no event later than one year following the Closing. The assets and liabilities of Itiviti have been measured based on various preliminary estimates using assumptions that Broadridge believes are reasonable based on information that is currently available.

The following table sets forth a preliminary allocation of the estimated Acquisition consideration to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Itiviti using Itiviti’s consolidated balance sheet as of December 31, 2020, with the excess recorded to goodwill which is not tax deductible:

Refer to the items below for a reconciliation of the pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet:

Refer to the items below for a reconciliation of the adjustments reflected in the unaudited pro forma condensed combined statements of earnings:

During the preparation of these unaudited pro forma condensed combined financial statements, management performed a preliminary analysis of Itiviti’s financial information to identify differences in accounting policies as compared to those of Broadridge and differences in financial statement presentation as compared to the presentation of Broadridge, including certain adjustments and reclassifications to conform the historical financial information of Itiviti from IFRS to U.S. GAAP and to translate the financial statements from EUR to USD.

Upon completion of the Acquisition, Broadridge will perform a detailed review of Itiviti's accounting policies. As a result of that review, Broadridge may identify differences between the accounting policies of Broadridge and Itiviti that, when conformed, could have a material impact on the consolidated financial statements of the combined company. At this time, Broadridge is not aware of any significant accounting policy differences.