Assets Held For Sale

3 Months Ended

Jul. 01, 2023

Asset, Held-for-Sale, Not Part of Disposal Group [Abstract]

ASSET HELD-FOR-SALE AND DIVESTITURE

Asset Held-For-Sale - PIM

On October 11, 2022, the Company announced entry into a definitive agreement to sell its Pipeline and Industrials Materials (“PIM”) business, which became part of the Company with the acquisition of CMC Materials, to Infineum USA L.P. (“Infineum”). The PIM business specializes in the manufacture and sale of drag reducing agents and a range of valve maintenance products and services, and reports into the Specialty Chemicals and Engineered Materials segment of the Company. Effective February 10, 2023, the Company terminated the definitive agreement. In accordance with the terms of the agreement, the Company received a $12.0 million termination fee from Infineum in the first quarter of 2023 and incurred a transaction adviser fee of $1.1 million. The net amount of $10.9 million is recorded in Other expense, net in the condensed consolidated statement of operations. At the time of the termination, the transaction had not received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”).

During the fourth quarter of 2022, the related assets and liabilities were classified as held-for-sale in the Company’s consolidated balance sheet and measured at the lower of their carrying amount or fair value less cost to sell. The assets and liabilities continue to be classified as held-for-sale at July 1, 2023.

The planned disposition of the PIM business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

PIM Assets-held-for sale comprise the following as of July 1, 2023:


(In thousands)
Assets:	July 1, 2023
Current assets	$	51,612
Property, Plant and Equipment, net	110,944
Intangible assets, net	76,692
Goodwill	12,707
Other assets	1,352
Total assets-held-for sale	$	253,307

Liabilities:
Accounts payable	$	6,628
Accrued expenses	6,584
Long-term liabilities	1,235
Total liabilities-held-for sale	$	14,447

Income before income taxes attributable to the PIM business was $12.7 million and $21.3 million for the three and six months ended July 1, 2023, respectively.

Asset held-for-sale - EC Business

On May 10, 2023, the Company announced entry into a definitive agreement to sell its Electronic Chemicals (“EC”) business, which became part of the Company with the acquisition of CMC Materials, to FUJIFILMS Holdings America Corporation for $700.0 million, subject to customary adjustments with respect to cash, working capital, indebtedness and transaction expenses. The EC business specializes in purification, formulation, blending, packaging and distribution of high-purity process chemicals used within the semiconductor and microelectronic manufacturing processes. The divestiture is currently expected to close before the end of 2023, subject to receipt of required regulatory approvals and other customary closing conditions. The EC business reports into the Advanced Planarization Solutions segment of the Company. The Company recognized a loss on the assets held-for-sale of $13.6 million on the sale for the EC business for the three and six months ended July 1, 2023. The loss is included in Selling, general and administrative expenses in the condensed consolidated statement of operations.

The planned disposition of the EC business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

EC Assets-held-for sale comprise the following as of July 1, 2023:


(In thousands)
Assets:	July 1, 2023
Current assets	$	106,063
Property, Plant and Equipment, net	170,180
Intangible assets, net	263,686
Goodwill	250,775
Other assets	7,936
Total assets-held-for sale	$	798,640

Liabilities:
Accounts payable	$	16,706
Accrued expenses	14,449
Long-term liabilities	70,182
Total liabilities-held-for sale	$	101,337

Loss before income taxes attributable to the EC business was $3.1 million and $86.6 million for the three and six months ended July 1, 2023. The loss before income taxes attributed to the EC business for the three and six months ended July 1, 2023 included the $13.6 million loss on held for sale as noted above and the six months ended included the $88.9 million goodwill impairment, see Note 5.

Divestiture - QED

During the first quarter of 2023, the Company announced entry into a definitive agreement to sell QED Technologies International, Inc. (“QED”), which offers magnetorheological finishing polishing and subaperture stitching interferometry metrology manufacturing solutions. to Quad-C Management, Inc. QED was a part of the Specialty Chemicals and Engineered Materials segment and became part of the Company with the acquisition of CMC Materials.

The Company completed the divestiture of QED on March 1, 2023 and received proceeds of $134.3 million after adjustments with respect to cash, working capital, indebtedness and transaction expenses. The disposition of QED did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. The following table summarizes the fair value of the sale proceeds received in connection with the divestiture, which are subject to further post-closing adjustment:


(In thousands)	March 1, 2023
Fair value of sale consideration	$	137,500
Final working capital adjustment	1,031
Cash transferred to the buyer on the closing balance sheet	(1,465)
Direct costs to sell	(2,780)
Fair value of sale consideration	$	134,286

The carrying amount of net assets associated with the QED business was approximately $149.2 million. The major classes of assets and liabilities sold consisted of the following:


(In thousands)	March 1, 2023
Assets:
Current assets	$	19,219
Property, plant and equipment, net	2,663
Goodwill	90,005
Intangible assets, net	48,661
Other assets	842
Total assets	$	161,390

Liabilities:
Accounts payable	$	1,340
Accrued expenses	8,750
Long-term liabilities	2,067
Total liabilities	$	12,157

As a result of the QED divestiture, the Company recognized a pre-tax loss of $1.3 million and $14.9 million presented in selling, general and administrative expenses on the condensed consolidated statements of operations for the three and six months ended July 1, 2023, respectively. The Company recorded an income tax benefit associated with the QED divestiture of approximately $6.8 million.

Termination - Alliance Agreement

On June 5, 2023, the Company announced the termination of an Alliance Agreement (the “Alliance Agreement”) between the Company and MacDermid Enthone Inc., a global business unit of Element Solutions Inc (“MacDermid Enthone”). Under the Alliance Agreement, Entegris had been granted the exclusive right to distribute MacDermid Enthone's Viaform products, subject to certain conditions. In connection with the termination of the Alliance Agreement, Entegris will receive a payment of $200.0 million, subject to certain adjustments, with $170.0 million that was paid on June 2, 2023 upon the termination of the alliance agreement and $30.0 million payable upon completion of customer transitions. The Company recognized a pre-tax gain of $154.8 million presented in gain on termination of alliance agreement on the condensed consolidated statements of operations for the three and six months ended July 1, 2023.