AVALON CABLE OF MICHIGAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)
("Novagate"), Traverse Internet, R/Com. L.C., the Mercom Merger and the
contribution of assets and liabilities by the Company) necessary to present
fairly the financial information included therein.
3. Merger and Acquisitions
The Merger agreement between Michigan Holdings and the Company permitted the
Company to agree to acquire the 1,822,810 shares (approximately 38% of the
outstanding stock) of Mercom that it did not own (the "Mercom Acquisition"). On
September 10, 1998 the Company and Mercom entered into a definitive agreement
(the "Mercom Merger Agreement") providing for the acquisition by the Company of
all of such shares at a price of $12.00 per share. The Company completed this
acquisition in March 1999. The total estimated consideration payable in
conjunction with the Mercom Acquisition, excluding fees and expenses was
$21,900. The purchase price was allocated as follows: approximately $13,800 to
the elimination of minority interest, $1,170 to property, plant and equipment,
$6,700 to cable franchises and the excess of consideration paid over the fair
market value of the net assets acquired, or goodwill, of $240.
In March 1999, the Company, through its subsidiary, Avalon Michigan LLC,
acquired the cable television systems of Nova Cable for approximately $7,800,
excluding transaction fees.
On January 21, 1999, the Company, through its subsidiary, Avalon New
England, acquired Novagate for a purchase price of $2,900.
On March 26, 1999, the Company, through its subsidiary, Avalon Michigan LLC,
acquired the assets of R/Com, L.C., for a total purchase price of approximately
In January 1999, the Company, through its subsidiary Avalon Michigan LLC,
acquired all of the issued and outstanding common stock of Cross Country for a
purchase price of approximately $2,500, excluding transaction fees.
On April 1, 1999, the Company, through its subsidiary, Avalon New England,
acquired Traverse Internet for $2,400.
The acquisitions have been accounted for as purchases and the results of the
companies acquired have been included in the accompanying financial statements
since their acquisition dates. Accordingly, the consideration was allocated to
the net assets based on their respective fair market values. The excess of the
consideration paid over the estimated fair market values of the net assets
acquired was $12,940 and is being amortized using the straight line method over
In July 1999, Avalon New England purchased all of the cable systems of
Taconic Technology Corporation for approximately $8,525 (excluding transaction
4. Minority Interest
The activity in minority interest for the six months ended June 30, 1999 is
Mercom LLC Total
---------- ---------- ----------
Balance at December 30, 1999 $ 13,855 $ 47,981 $ 61,836
Purchase of the minority interest of Mercom (13,855) -- (13,855)
Loss allocated to minority interest -- (2,354) (2,354)
-------- -------- --------
$ -- 45,627 45,627
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