Freedom Holding Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS

ACQUISITIONS

9 Months Ended

Dec. 31, 2020

NOTE 19 – ACQUISITIONS

The acquisitions below were accounted for under the acquisition method of accounting in accordance with ASU Topic 805, Business Combinations.

Acquisition of Zerich

On July 2, 2020, we completed the acquisition of Zerich following receipt of approval from the Russian Federal Antimonopoly Service. Zerich commenced business in 1995 and is one of the oldest securities brokerage firms in Russia. The Company acquired Zerich for $7,110. The total purchase price was allocated as follows:

	Purchase price allocation
	As of July 2, 2020
Assets:
Cash and cash equivalents	$	26,760
Restricted cash		1,231
Trading securities		2,828
Fixed assets		8
Intangible assets		3,733
Right-of-use asset		454
Brokerage and other receivables		376
Other assets		94
Total assets	$	35,484

Liabilities:
Customer liabilities	$	25,799
Securities repurchase agreement obligation		1,600
Lease liabilities		497
Trade and other payables		104
Other liabilities		419
Total liabilities	$	28,419

Net assets acquired	$	7,065

Goodwill		45

Total purchase price	$	7,110

On December 27, 2020, Zerich was merged into Freedom RU and its separate legal existence terminated. The assets and liabilities of Zerich were transferred to Freedom RU at their perspective carrying amounts on the date of the merger was completed.

Acquisition of Prime Executions

On December 29, 2020, the Company completed the acquisition of Prime Executions. Prime Executions commenced business in 1985 and is an agency only execution broker dealer located on the floor of the NYSE. The Company acquired Prime Executions for $2,500. The total purchase price was allocated as follows:

	Purchase price allocation
	As of December 29, 2020
Assets:
Cash and cash equivalents	$	206
Brokerage and other receivables		849
Intangible assets		532
Other assets		9
Total assets	$	1,596

Liabilities:
Other liabilities	$	610
Total liability	$	610

Net Assets Acquired	$	986

Goodwill		1,514

Total purchase price	$	2,500

Acquisition of Freedom Bank KZ

On December 28, 2020, the Company closed the acquisition of Freedom Bank KZ, following receipt of approval from the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market. Freedom Bank KZ is a Kazakhstani based second tier Bank. For accounting purposes, on December 25, 2020, the Company acquired control over the entity by purchasing the common shares of Freedom Bank KZ. The total purchase price of this acquisition was $53,097 which was paid in cash. The purchase price included consideration paid for the outstanding common shares in the amount of $40,984, consideration paid for the outstanding preferred shares in the amount of $2,478 and consideration paid for outstanding subordinated loans in the amount of $9,635. The purchase price as of the control acquisition date was allocated as follows:

	Purchase price allocation As of December 25, 2020
Assets:
Cash and cash equivalents	$	129,185
Trading securities		50,684
Brokerage and other receivables		2,601
Fixed assets		10,987
Intangible assets		2,769
Right-of-use asset		338
Loans issued		1,023
Other assets		2,360
Total assets	$	199,947

Liabilities:
Customer liabilities	$	117,195
Current income tax liability		415
Trade payables		104
Securities repurchase agreement obligation		28,500
Lease liability		338
Other liabilities		827
Deferred income tax liabilities		1,399
Total liability	$	148,778

Net Assets Acquired	$	51,169

Goodwill		1,928

Consideration paid for common shares		40,984
Consideration paid for preferred shares		2,478
Consideration paid for subordinated loans		9,635
Total purchase price	$	53,097

Unaudited Supplemental Pro forma Information

The following unaudited supplemental pro forma information reflects our combined results of operations had the acquisition occurred at the beginning of fiscal 2019. The pro forma information reflects certain adjustments related to the acquisition. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the acquisition. Accordingly, this pro forma information is for illustrative purposes and is not intended to represent the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of fiscal 2019, nor is it intended to indicate future results of operations. The pro forma combined results of operations for the three-months ended and nine-months ended December 31, 2020, and 2019 are as follows:

	Unaudited supplemental pro forma information
	Three months ended December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Net Interest Income	$	2,791	$	4,768	$	10,630	$	13,825
Net Сommission Income		54,424		15,865		123,211		58,255
Net Income		45,709		5,042		95,609		24,762

WA number of shares (basic)		58,395,606		58,158,864		58,370,521		58,116,825
WA number of shares (diluted)		58,450,688		58,391,547		58,423,467		58,335,749

EPS (basic)	$	0.78	$	0.09	$	1.64	$	0.43
EPS (diluted)	$	0.78	$	0.09	$	1.64	$	0.42