BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES

12 Months Ended

Jun. 30, 2020

BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES

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. 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 preliminary fair values are substantially complete, with the exception of primarily accrued expenses and goodwill. 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^(a)		Measurement period adjustments^(b)		Estimated fair value as adjusted		Estimated useful life (in years)
Cash and cash equivalents	$	7.8	$	—	$	7.8
Receivables	2.2		(1.2)		1.0
Inventories	2.5		—		2.5
Property, plant and equipment	3.6		—		3.6
Collaboration agreement	369.0		—		369.0		20
License agreement	280.0		—		280.0		20
Customer relationships	27.0		—		27.0		1.5
Goodwill	127.4		1.2		128.6		Indefinite
Net other liabilities	(6.6)		—		(6.6)
Total value	$	812.9	$	—	$	812.9

Noncontrolling interest	212.9				212.9
Total purchase price	$	600.0			$	600.0

^(a) As previously reported in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

^(b) The Company recorded measurement period adjustments in the fourth quarter of fiscal 2020 to certain working capital accounts as a result of obtaining new facts and circumstances that existed at the acquisition date.

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 year ended June 30, 2020, net revenues and net loss of King Kylie included in the Company’s Consolidated Statements of Operations were $52.0 and $11.7, respectively. Net income for the fiscal year ended June 30, 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 year ended June 30, 2020 by $24.4.

Burberry Beauty Business Acquisition

On October 2, 2017, the Company acquired the exclusive global license rights and other related assets for the Burberry Limited (“Burberry”) prestige fragrances, cosmetics and skincare business (the “Burberry Beauty Business”). The Burberry Beauty Business acquisition further strengthens the Company’s position in the global prestige beauty industry. Total purchase consideration, after post-closing adjustments, was £191.7, the equivalent of $256.3, at the time of closing. Included in the purchase price was cash consideration of £183.3, the equivalent of $245.1, at the time of closing, in addition to £8.4, the equivalent of $11.2, of estimated contingent consideration, at the time of closing.

From the date of acquisition through the end of fiscal 2020, the Company made all contingent payments and has no further contractual obligation to make future payments.

The Company has finalized the valuation of assets acquired and liabilities assumed for the Burberry Beauty Business acquisition. The Company recognized certain measurement period adjustments as disclosed below during the three months ended September 30, 2018. The measurement period for the Burberry Beauty Business acquisition closed on October 1, 2018.

The following table summarizes the estimated allocation of the purchase price to the net assets of the Burberry Beauty Business as of the October 2, 2017 acquisition date:


	Estimated fair value as previously reported^(a)		Measurement period adjustments^(b)		Estimated fair value as adjusted		Estimated useful life (in years)
Inventories	$	47.9	$	—	$	47.9
Property, plant and equipment	5.8		—		5.8		1 - 3
License and distribution rights	177.8		6.7		184.5		3 - 15
Goodwill	34.9		(9.4)		25.5		Indefinite
Net other liabilities	(10.1)		2.7		(7.4)
Total purchase price	$	256.3	$	—	$	256.3

^(a)As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

^(b)The Company recorded measurement period adjustments in the first quarter of fiscal 2019. The measurement period adjustments related to an increase in the value of the License and distribution rights due to changes in assumptions that were used at the date of acquisition for valuation purposes. The measurement period adjustment related to the decrease in net other liabilities acquired was a result of obtaining new facts and circumstances about acquired accrued expenses that existed as of the acquisition date. All measurement period adjustments were offset against Goodwill.

Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Burberry Beauty Business products into the Company’s existing sales channels. Goodwill of $6.2, $9.2, and $3.9 is allocated to the Americas, EMEA, and Asia Pacific segments, respectively. Goodwill includes amounts related to discontinued operations of $6.2. The allocation of goodwill to the segments were due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the Burberry Beauty Business acquisition.

The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results are not presented.

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. During the fiscal year June 30, 2020, the Company recorded a final pre-tax gain of $111.5 resulting from the sale. The final pre-tax gain is included in (Gain) loss on divestitures and sale of brand assets in the Consolidated Statements of Operations for the fiscal year ended June 30, 2020.

Younique’s operations are included within Other and its results of operations through the Closing Date are included in the Consolidated Statements of Operations for the fiscal year ended June 30, 2020.