BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Note 2 — BUSINESS COMBINATIONS

On July 1, 2020, we completed our acquisition of the equity interests in the global color business of Clariant AG, a corporation organized and existing under the law of Switzerland (Clariant), and certain assets of Clariant Chemicals (India) Limited, a public limited company incorporated in India and an indirect majority owned subsidiary of Clariant (Clariant India). The business and assets are collectively referred to as Clariant Color and the acquisitions are collectively referred to as the Clariant Color Acquisition.

Total consideration paid by the Company to complete the Clariant Color Acquisition was $1.4 billion, net of cash and debt. To finance the purchase of Clariant Color, the Company used $496.1 million of net proceeds from the issuance of common shares in an underwritten public offering completed in February 2020 and $640.5 million of net proceeds from a senior unsecured notes offering completed in May 2020, and funded the balance using the net proceeds of the October 2019 sale of our Performance Products and Solutions business segment (PP&S). For additional details related to the sale of PP&S and the senior unsecured notes offering, refer to Note 3, Discontinued Operations and Note 6, Financing Arrangements, respectively.

The Clariant Color Acquisition is being accounted for under the acquisition method of accounting in accordance with ASC Topic 805. As of June 30, 2021, the purchase accounting for the Clariant Color Acquisition was finalized.

The summarized purchase price allocation is as follows:


(In millions)	Preliminary Allocation As of December 31, 2020		Measurement Period Adjustments		Final Allocation
Cash and cash equivalents	$	145.1	$	—	$	145.1
Accounts receivable	170.8		—		170.8
Inventories	99.0		0.2		99.2
Other current assets	56.9		6.3		63.2
Property	267.6		(7.5)		260.1
Goodwill	569.0		(7.8)		561.2
Intangible assets:			—
Customer relationships	221.9		(20.7)		201.2
Trade names and trademarks	32.0		2.8		34.8
Patents, technology and other	273.9		7.4		281.3
Operating lease assets	30.1		—		30.1
Other long-term assets	1.3		5.8		7.1
Short term debt	(0.4)		—		(0.4)
Accounts payable	(92.7)		1.2		(91.5)
Current operating lease obligations	(2.8)		—		(2.8)
Accrued expenses and other current liabilities	(81.2)		(4.5)		(85.7)
Long-term debt	(6.7)		—		(6.7)
Non-current operating lease obligations	(25.8)		—		(25.8)
Deferred tax liabilities	(60.7)		25.9		(34.8)
Pension and other post-retirement benefits	(53.8)		—		(53.8)
Other long-term liabilities	(5.4)		(6.7)		(12.1)
Non-controlling interests	(12.8)		(2.4)		(15.2)
Total purchase price consideration	$	1,525.3	$	—	$	1,525.3

The intangible assets that have been acquired are being amortized over a period of 18 to 20 years.

Goodwill of $561.2 million was recorded and allocated to the Color, Additives and Inks segment. The goodwill recognized is primarily attributable to the expected synergies to be achieved from the business combination. A portion of the goodwill is deductible for tax purposes.

Had the Clariant Color Acquisition occurred on January 1, 2019, which was the beginning of the fiscal year prior to the acquisition, sales and income from continuing operations before income taxes for the years ended December 31, 2020 and 2019 on a pro forma basis would have been as follows:


	(Unaudited)

(In millions)	2020		2019
Sales	$	3,782.5	$	3,981.3
Income from continuing operations before income taxes	204.2		98.9

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments that assume the Clariant Color Acquisition occurred on January 1, 2019. These unaudited pro forma results do not represent financial results realized, nor are they intended to be a projection of future results. In preparation of the pro forma financial information, we eliminated certain historical allocations made by Clariant as they do not represent the stand alone operations of Clariant Color and replaced them with costs more likely to occur as a part of Avient. This elimination removed expense of $6.6 million and $12.7 million during 2020 and 2019, respectively. The amortization of inventory step-up from the preliminary purchase price allocation was $9.7 million, and is reflected in Cost of sales. Additionally, we incurred $10.1 million of costs related to committed financing which are reflected in Interest expense, net. The amounts

associated with the amortization of inventory step-up and costs related to committed financing were removed from 2020, and presented in the pro forma financial information.

Costs incurred in connection with the Clariant Color Acquisition were $19.2 million in 2020. These fees were charged to Selling and Administrative expense.

Other Acquisitions

On July 1, 2021, the Company completed its acquisition of Magna Colours Ltd. (Magna Colours), a market leader in sustainable, water-based inks technology for the textile screen printing industry, for the purchase price of $47.6 million, net of cash acquired. The results of the Magna Colours business are reported in the Color, Additives and Inks segment. The preliminary purchase price allocation resulted in intangible assets of $27.5 million and goodwill of $22.0 million, partially offset by net liabilities assumed. Goodwill is not deductible for tax purposes. The intangible assets that have been acquired are being amortized over a period of 10 to 20 years.

Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line, LLC (Fiber-Line) on January 2, 2019 involved contingent earnout consideration. The PlastiComp earnout had a ceiling of $35.0 million that was reached during the first quarter of 2020 and paid in the third quarter of 2020. The Fiber-Line earnout was based on two annual earnout periods, with the second earnout period target based on year-one results. A payment of $53.9 million associated with the first Fiber-Line earnout period was made in the first quarter of 2020. There was no payment made for the second Fiber-Line earnout period, which ended on December 31, 2020.