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 11., “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”, as 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 December 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 ("the acquisition date"), 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.

We purchased all of its outstanding capital stock for an aggregate consideration of $357.2 million funded by a $229.7 million three-day promissory note and $127.5 million in cash. The three-day promissory note was settled with cash on hand and borrowings under our Credit Facility. During the year ended December 28, 2018, we adjusted the purchase price to $357.2 million due to proceeds received as a result of settlement provisions contained in the purchase agreement and measurement period adjustments.

The fair value of the definite-lived intangible assets including customer lists, trade names and trademarks at the acquisition date were $139.8 million. The $162.0 million allocated to goodwill on our Consolidated Balance Sheets represents the excess of the purchase price over the values of assets acquired and liabilities assumed. The goodwill is expected to be deductible for tax purposes.

Our definite-lived intangible assets relate to $115.6 million in customer lists with a weighted average amortization period of 23 years and $24.2 million of trade names and trademarks with a weighted average amortization period of 11 years.

Our reportable segments have included goodwill related to this acquisition of $113.2 million in the other fresh produce segment and $48.8 million in the prepared food segment.

We recognized $3.8 million of acquisition related costs which primarily consist of compensatory, advisory, legal, accounting, valuation, other professional and consulting fees related to the Mann Packing acquisition, and are included in asset impairment and other charges, net. Refer to Note 3. “Asset Impairment and Other Charges, Net".

4. Acquisitions (continued)

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



	As Previously Reported as of September 28, 2018		Adjustments			As Adjusted
Assets acquired
Current assets:
Cash and cash equivalents	$	0.1	$	1.3		$	1.4
Trade accounts receivable, net of allowance	39.4		(2.4		)	37.0
Other accounts receivable, net of allowance	4.0		1.3			5.3
Inventories, net	20.9		2.9			23.8
Prepaid expenses and other current assets	2.1		1.8			3.9
Total current assets	66.5		4.9			71.4


Property, plant and equipment, net	97.1		(0.9		)	96.2
Definite-lived intangible assets, net	135.9		3.9			139.8
Goodwill	159.9		2.1			162.0
Total assets acquired	$	459.4	$	10.0		$	469.4
Liabilities assumed
Current liabilities:
Accounts payable and accrued expenses	48.9		15.9			64.8
Total liabilities assumed	48.9		15.9			64.8

Less: Redeemable noncontrolling interest	39.1		8.3			47.4

Net assets acquired	$	371.4	$	(14.2	)	$	357.2

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 five-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. At each reporting period, the redeemable noncontrolling interest is recognized at the higher of 1) the accumulated earnings or 2) the contractually-defined redemption value as of the balance sheet date. The fair value of the redeemable noncontrolling interest at acquisition date is $47.4 million.

4. Acquisitions (continued)

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



	Period from February 27, 2018 to December 28, 2018
Net sales	$	488.6
Net (loss) income attributable to Fresh Del Monte Produce, Inc.	$	(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:



	Year ended
	December 28, 2018				December 29, 2017
Net sales	$	4,573.1			$	4,621.6

Net (loss) income attributable to Fresh Del Monte Produce, Inc.	$	(18.6	)	⁽¹⁾	$	134.9	⁽²⁾

⁽¹⁾Unaudited pro forma results for the year ended December 28, 2018 were positively adjusted by $10.8 million consisting of $12.7 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 year ended December 29, 2017 were adjusted to include $8.7 million of interest expense as a result of increased borrowings under our Credit Facility.

The change in provisional amounts resulted in $8.7 million for the year ended December 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 $6.9 million for the year ended December 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 $1.8 million for the year ended December 28, 2018 included in cost of products sold on our Consolidated Statements of Operations.