BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES

9 Months Ended

Mar. 31, 2020

BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES

Business Combinations and Asset Acquisitions

King Kylie Transaction

On November 18, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with King Kylie, LLC ("King Kylie"), a Delaware limited liability company, and the other parties listed as signatories to the Purchase Agreement (the “Seller Group Parties”), to build and further expand King Kylie’s brands globally. Pursuant to the Purchase Agreement, on January 6, 2020, the Company acquired 51% of the equity interests in King Kylie from the applicable Seller Group Parties for a base purchase price of $600.0 in cash, subject to certain post-closing adjustments. In addition, as contemplated by the Purchase Agreement, the Company entered into a Collaboration Agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain products of King Kylie and use certain intellectual property owned by or licensed to King Kylie in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products.

The Company estimated the preliminary fair value of acquired assets, liabilities and noncontrolling interest as of the date of acquisition based on information currently available. The Company is still evaluating the fair value of assets acquired and liabilities assumed. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table summarizes the estimated allocation of the purchase price to the net assets as of the January 6, 2020 acquisition date:


	Estimated fair value		Estimated useful life (in years)
Cash and cash equivalents	$	7.8
Receivables	2.2
Inventories	2.5
Property, plant and equipment	3.6
Collaboration agreement	369.0		20
License agreement	280.0		20
Customer relationships	27.0		1.5
Goodwill	127.4		Indefinite
Net other liabilities	(6.6)
Total value	$	812.9

Noncontrolling interest	212.9
Total purchase price	$	600.0

Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating King Kylie’s products into the Company’s existing manufacturing and sales channels.

The fair value of the noncontrolling interest was estimated using the income approach applied to the projected cash flows of King Kylie. As King Kylie is a private company, the fair value measurement was based on significant inputs that are not observable in the market and thus, represent a Level 3 measurement.

For the fiscal quarter ended March 31, 2020, net revenues and net income of King Kylie included in the Company’s Consolidated Statements of Operations were $37.0 and $1.8, respectively. Net income for the fiscal quarter ended March 31, 2020 was impacted by the amortization of certain asset values based on the estimated fair values of the acquired assets as determined during the initial purchase accounting, such as the amortization of finite-lived intangibles. This amortization impacted the net income for the fiscal quarter ended March 31, 2020 by $11.5.

Business Divestitures

Younique

On August 27, 2019, the Company entered into a Contribution and Redemption Agreement to transfer all of its membership interest in Foundation, which held the net assets of Younique, to an existing noncontrolling interest holder. On September 16, 2019 (the “Closing Date”), the Company completed the sale of all of its membership interest in Foundation. Consideration received at the Closing Date consisted of $50.0 cash and a secured promissory note with a face value of $27.9. The sale resulted in a pre-tax gain of $84.5, included in Gain on sale of business in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2020. Younique’s operations are included within Other and its results of operations through the Closing Date are included in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2020.

Other Transactions

Southeast Asian subsidiary

In July 2019, the Company purchased the remaining 49% noncontrolling interest in a certain consolidated Southeast Asian subsidiary. Refer to Note 17—Mandatorily Redeemable Financial Interests and Redeemable Noncontrolling Interests.