Assets Held For Sale

3 Months Ended

Sep. 30, 2023

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

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 Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials segments) 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 September 30, 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 September 30, 2023:


(In thousands)
Assets:	September 30, 2023
Current assets	$	49,277
Property, Plant and Equipment, net	113,305
Intangible assets, net	76,692
Goodwill	12,707
Other assets	1,364
Total assets-held-for sale	$	253,345

Liabilities:
Accounts payable	$	5,675
Accrued expenses	7,978
Long-term liabilities	1,959
Total liabilities-held-for sale	$	15,612

Income before income taxes attributable to the PIM business was $12.0 million and $33.3 million for the three and nine months ended September 30, 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 FUJIFILM Holdings America Corporation for approximately $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. In connection with the held-for-sale classification, upon the remeasurement of the disposal group to its fair value, less cost to sell, we recognized a loss on the assets held-for-sale of $13.6 million as loss on held for sale for the three months ended July 1, 2023 and a loss of $15.9 million on impairment of goodwill for the three months ended September 30, 2023. The loss on assets held-for-sale are included in Selling, general and administrative expenses and the goodwill impairment is included in goodwill impairment in the condensed consolidated statement of operations.

The 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 September 30, 2023:


(In thousands)
Assets:	September 30, 2023
Current assets	$	92,563
Property, Plant and Equipment, net	177,020
Intangible assets, net	263,686
Goodwill	250,638
Other assets	7,965
Total assets-held-for sale	$	791,872

Liabilities:
Accounts payable	$	18,975
Accrued expenses	15,255
Long-term liabilities	89,428
Total liabilities-held-for sale	$	123,658

(Income)/Loss before income taxes attributable to the EC business was ($0.9) million and $85.7 million for the three and nine months ended September 30, 2023. The loss before income taxes attributed to the EC business for the three months ended September 30, 2023 includes incremental goodwill impairment of $15.9 million. The loss before income taxes attributable to the EC business for the nine months ended September 30, 2023 includes total goodwill impairment charges of $104.8 million and loss on assets held-for-sale of $13.6 million for expected transaction expenses.

On October 2, 2023, following the end of our third quarter of 2023, the Company completed the sale of the EC business. The Company received gross cash proceeds of $737.1 million, or net proceeds of $694.3 million, which includes cash sold of $42.8 million, which remains subject to customary final post-closing adjustments. The Company intends to use the proceeds of this transaction for early repayment of debt.

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 what is now the Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials segments) 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)
Assets:	March 1, 2023
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 $14.9 million presented in selling, general and administrative expenses on the condensed consolidated statements of operations for the nine months ended September 30, 2023. The Company recorded an income tax benefit associated with the QED divestiture of approximately $6.8 million.

Termination - Alliance AgreementOn June 5, 2023, the Company announced the termination of the 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 received a payment of $170.0 million on June 2, 2023 and will receive $30.0 million payable upon completion of customer transitions, subject to certain adjustments. 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 nine months ended September 30, 2023, respectively.