Acquisition

6 Months Ended

Jul. 03, 2021

ACQUISITIONS

CMC Materials

On July 6, 2022 (the “Closing Date”), the Company completed its acquisition of CMC Materials, Inc. (“CMC Materials” or “CMC”). The Company acquired all of the issued and outstanding common shares of CMC Materials for $133.00 in cash and 0.4506 shares of the Company’s common stock per share, (the “Merger Consideration”), representing a total purchase price (inclusive of debt retired and cash assumed) at close of approximately $5.7 billion (based on the Company’s closing price on June 30, 2022), including $3.8 billion in cash paid to CMC Materials’ stockholders, the issuance of 12.9 million shares of the Company’s common stock (excluding unvested CMC stock options and unvested CMC restricted stock units, restricted shares and performance share unit equity awards assumed), approximately $0.9 billion of debt retired and approximately $200 million of acquired cash. The Company financed the cash portion of the purchase price through debt financing. Certain information necessary to complete the preliminary purchase price allocation related to the acquisition was not yet available as of the date of this Quarterly Report.

Precision Microchemicals

On November 30, 2021, the Company completed its acquisition of the Precision Microchemicals business from BASF SE. As of the date of this Quarterly Report, the Precision Microchemicals business reports into the Specialty Chemicals and Engineered Materials segment of the Company. The acquisition was accounted for under the acquisition method of accounting, and the Precision Microchemicals business results of operations are included in the Company’s consolidated financial statements as of and since November 30, 2021. The acquisition does not constitute a material business combination.

The purchase price for the Precision Microchemical business included cash consideration of $89.7 million (net of cash acquired), which was funded from the Company’s existing cash on hand.

The purchase price of the Precision Microchemical business exceeded the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $42.8 million. Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to the Company, which resulted in a purchase price in excess of the fair value of identifiable net assets. This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.

The fair value of acquired identifiable intangible assets was determined using Level 3 inputs for the “income approach” on an individual asset basis. The key assumptions used in the calculation of the discounted cash flows include future revenue growth rates, future gross margin, future selling, general and administrative expense, royalty rates, and discount rates. The valuations and the underlying assumptions have been deemed reasonable by the Company’s management. There are inherent uncertainties and management judgment required in these determinations.

During the quarter ended April 2, 2022, the Company finalized its fair value determination of the assets acquired and the liabilities assumed. The following table summarizes the final allocation of the purchase price to the fair values assigned to the

assets acquired and liabilities assumed at the date of the acquisition:


(In thousands):	November 30, 2021		As of April 2, 2022
Inventories, net	$	967	$	967
Other current assets	19		19
Identifiable intangible assets	44,910		44,910
Right-of-use assets	1,912		1,912
Property, plant and equipment	1,002		1,002
Other noncurrent assets	18		18
Accounts payable and accrued liabilities	(43)		(30)
Short-term lease liability	(170)		(170)
Long-term lease liability	(1,742)		(1,742)
Net assets acquired	46,873		46,886
Goodwill	42,819		42,824
Total purchase price, net of cash acquired	$	89,692	$	89,710

The Company recognized the following finite-lived intangible assets as part of the acquisition of the Precision Microchemicals business:


(In thousands)	Amount		Weighted average life in years
Developed technology	$	9,600	9.0
Trademarks and trade names	3,400		15.0
Customer relationships	31,800		15.5
Other	110
	$	44,910	14.1