Acquisitions

On June 5, 2018, we acquired a 70% interest in a hydroponic herb farm in the Middle East for a purchase price of $1.7 million funded using operating cash flows and available borrowings under the Credit Facility (as defined in Note 12, “Long-Term Debt and Capital Lease Obligations”). The results of operations have been included in our consolidated financial statements since that date. The acquisition consisted primarily of working capital and property, plant and equipment.

On May 7, 2018, we paid $4.2 million for a 10% equity ownership interest in Three Limes, Inc., d/b/a The Purple Carrot, a privately-held company providing plant-based meal kits in North America. Our investment was funded using operating cash flows and available borrowings under the Credit Facility. We account for this investment using the measurement alternative election under the ASC guidance on “Financial Instruments”, and we do not exercise significant influence over the privately-held company’s operating or financial activities. The measurement alternative election requires us to measure the investment at cost less impairment, if any, adjusted for observable price changes in orderly transactions for the identical or similar investments. No adjustments or impairments have been made as of September 28, 2018. We review our investments for impairment when events and circumstances indicate that the decline in fair value of such assets below the carrying value is other-than-temporary.

On February 26, 2018, we completed the acquisition of 100% of the voting interests of Mann Packing. The results of Mann Packing's operations have been included in our consolidated financial statements since that date. This acquisition expanded our fresh-cut, vegetable and prepared product offerings in North America. In addition, this transaction is expected to provide us with the following synergies:


•	Acceleration of expansion strategy at Mann Packing's key retailers and channels;


•	Improvement of our access to key retailers and food service distribution;


•	Development of a forward distribution model to offer just-in-time delivery services nationwide by leveraging our North America distribution infrastructure to significantly broaden national coverage for our value-added vegetable products;


•	Procurement savings by leveraging product sourcing in North America and lower cost sourcing opportunities using our infrastructure in Central America. In addition to enhanced packaging, materials, equipment and other consolidated component savings;


•	Expansion of Mann Packing's production capacity in the United States by leveraging our existing facilities to improve Mann Packing's reach; and


•	Marketing and overhead synergies resulting from opportunities to pursue co-branding and better pricing potential utilizing the DEL MONTE^® brand.

5. Acquisitions (continued)

We purchased all of its outstanding capital stock for an aggregate consideration of $372.9 million funded by a $229.7 million three-day promissory note and $143.2 million in cash. The three-day promissory note was settled with cash on hand and borrowings under our Credit Facility. During the third quarter of 2018, we adjusted the purchase price to $371.4 million by $1.5 million with a corresponding decrease to goodwill due to proceeds received as a result of settlement provisions contained in purchase agreement.

Based on an evaluation of the provisions of ASC Business Combinations ("Topic 805"), the purchase price allocation reflected in the accompanying financial statements is preliminary and is based upon estimates and assumptions that are subject to change within the measurement period. Topic 805 allows entities a measurement period of up to one year from the acquisition date to finalize the allocation.

The measurement period remains open pending the completion of valuation procedures related to the acquired tangible and intangible assets, assumed liabilities and redeemable non-controlling interests. During the third quarter of 2018, we have preliminarily estimated that the fair value of the definite-lived intangible assets including customer lists, trade names and trademarks were $135.9 million and the fair value of the property, plant and equipment increased by $26.9 million, each with a corresponding decrease to goodwill. We have made other immaterial adjustments listed below with a corresponding increase or decrease to goodwill due to new information obtained during the measurement period for amounts that existed on the acquisition date. The $159.9 million allocated to goodwill on our Consolidated Balance Sheets represents the excess of the purchase price over the preliminary values of assets acquired and liabilities assumed and is subject to revision. We are still evaluating the tax implications of this transaction.

We are still evaluating our definite-lived intangible assets of which $113.2 million relates to customer lists with a weighted average amortization period of 26 years and $22.7 million relates to trade names and trademarks with a weighted average amortization period of 9 years.

We are still evaluating our reportable segments and have preliminarily included goodwill related to this acquisition of $118.0 million in the other fresh produce segment and $41.9 million in the prepared foods segment.

We recognized $2.6 million of acquisition related costs which primarily consist of advisory, legal, accounting, valuation, other professional and consulting fees and are included in asset impairment and other charges, net. Refer to Note 4, “Asset Impairment and Other Charges, Net".

5. Acquisitions (continued)

The following table summarizes the preliminary estimated fair values of the net assets acquired and liabilities assumed at the date of the acquisition:



	As Previously Reported		Adjustments			As Adjusted
Assets acquired
Current assets:
Cash and cash equivalents	$	0.1	$	—		$	0.1
Trade accounts receivable, net of allowance	39.4		—			39.4
Other accounts receivable, net of allowance	1.2		2.8			4.0
Inventories, net	21.1		(0.2		)	20.9
Prepaid expenses and other current assets	2.1		—			2.1
Total current assets	63.9		2.6			66.5

Property, plant and equipment, net	70.2		26.9			97.1
Definite-lived intangible assets, net	—		135.9			135.9
Goodwill	328.8		(168.9		)	159.9
Total assets acquired	$	462.9	$	(3.5	)	$	459.4
Liabilities assumed
Current liabilities:
Accounts payable and accrued expenses	50.9		(2.0		)	$	48.9
Total liabilities assumed	$	50.9	$	(2.0	)	$	48.9

Less: Redeemable noncontrolling interest	39.1		—			39.1

Net assets acquired	$	372.9	$	(1.5	)	$	371.4

The Mann Packing acquisition includes a put option exercisable by the 25% shareholder of one of the acquired subsidiaries. The put option allows the noncontrolling shareholder to sell its 25% noncontrolling interest to us for a multiple of the subsidiary's adjusted earnings. The noncontrolling shareholder can exercise this put option on or after April 1, 2023. Following a 5-year window expiring on April 1, 2028, the put option value will be negotiated annually and the inputs are subject to change. As the put option is outside of our control, the estimated redemption value of the 25% noncontrolling interest is presented as a redeemable noncontrolling interest outside of permanent equity on our Consolidated Balance Sheets. The fair value assigned to this interest at acquisition date is subject to change and is pending completion. Refer to Note 7, “Redeemable Noncontrolling Interests”, for further discussion.

5. Acquisitions (continued)

Our consolidated results include the following unaudited financial information of Mann Packing:



	Quarter ended September 28, 2018			Period from February 27, 2018 to September 28, 2018
Net sales	$	142.5		$	339.9
Net (loss) income attributable to Fresh Del Monte Produce, Inc.	$	(5.2	)	$	(1.7	)

The following unaudited pro forma combined financial information presents our results including Mann Packing as if the business combination had occurred at the beginning of fiscal year 2017:



	Quarter ended						Nine months ended
	September 28, 2018			September 29, 2017			September 28, 2018			September 29, 2017
Net sales	$	1,069.5		$	1,087.5		$	3,527.0		$	3,537.9

Net (loss) income attributable to Fresh Del Monte Produce, Inc.	$	(21.5	)	$	15.1	⁽²⁾	$	14.2	⁽¹⁾	$	144.9	⁽³⁾

⁽¹⁾Unaudited pro forma results for the nine months ended September 28, 2018 were positively adjusted by $9.6 million consisting of $11.5 million of nonrecurring transaction related compensation benefits, advisory, legal, accounting, valuation and other professional fees, partially offset by $1.9 million of interest expense as a result of increased borrowings under our Credit Facility.

⁽²⁾Unaudited pro forma results for the quarter ended September 29, 2017 were adjusted to include $2.1 million of interest expense as a result of increased borrowings under our Credit Facility.

⁽³⁾Unaudited pro forma results for the nine months ended September 29, 2017 was adjusted to include $6.1 million of interest expense as a result of increased borrowings under our Credit Facility.

5. Acquisitions (continued)

The change in provisional amounts resulted in $2.3 million for the three months ended September 28, 2018 and $5.4 million for the nine months ended September 28, 2018 in additional amortization and depreciation related to definite-lived intangible assets and property, plant and equipment. The change in provisional amounts for definite-lived intangible assets resulted in amortization expense of $1.7 million for the third quarter and $4.0 million for the nine months ended September 28, 2018 included in selling, general and administrative expenses on our Consolidated Statements of Operations. The change in provisional amounts on property, plant and equipment resulted in depreciation expense of $0.6 million for the third quarter and $1.4 million for the nine months ended September 28, 2018 included in cost of products sold on our Consolidated Statements of Operations.