Acquisitions and Dispositions

6 Months Ended

Mar. 28, 2020

Acquisitions and Dispositions [Abstract]

4. Acquisitions and Dispositions

RPC Group Plc

In July 2019, the Company completed the acquisition of the entire outstanding share capital of RPC Group Plc (“RPC”), for aggregate consideration of $6.1 billion. RPC is a leading plastic product design and engineering company for packaging and select non-packaging markets, with 189 sites in 34 countries. RPC develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end markets it serves and the geographical areas in which it operates. It uses a wide range of polymer conversion techniques in both rigid and flexible plastics manufacture, and is one of the largest plastic converters in Europe. The international based facilities are operated within the Consumer Packaging International segment with the remaining U.S. based facilities operated within the Consumer Packaging North America segment. The results of RPC have been included in the consolidated results of the Company since the date of the acquisition.

Net sales and operating income of RPC included in the Consolidated Statements of Income for the quarterly period ended March 28, 2020 were $1,174 million and $81 million, respectively. The majority of RPC activity for the quarter ended March 28, 2020, net sales of $1,045 million and operating income of $65 million, is operated in the Consumer Packaging International segment. Net sales and operating income of RPC included in the Consolidated Statements of Income for the two quarterly periods ended March 28, 2020 were $2,256 million and $135 million, respectively. The majority of RPC activity for the two quarterly periods ended March 28, 2020, net sales of $2,006 million and operating income of $107 million, is operated in the Consumer Packaging International segment.

The acquisition has been accounted for under the purchase method of accounting. Under this method, the assets acquired and liabilities assumed have been recorded based on preliminary valuation estimates of fair value. The final purchase accounting allocations for the RPC acquisition will depend on a number of factors, including the final valuation of our long-lived tangible and identified intangible assets acquired and liabilities assumed, and finalization of income tax effects of the opening balance sheet. The actual fair values of RPC’s assets acquired, liabilities assumed and resulting goodwill may differ materially once finalized. The Company has recognized goodwill on this transaction primarily as a result of expected cost synergies, and expects goodwill to be partially deductible for tax purposes.

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on a preliminary valuation report resulting in a $211 million decrease in the property, plant and equipment, a $47 million decrease in intangible assets, a $19 million increase in inventory and a $89 million decrease in deferred tax liabilities. These adjustments resulted in corresponding increases to goodwill.

The following table summarizes the preliminary purchase price allocation and resulting measurement period adjustments from the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition (in millions):

Consideration
Cash	$	6,079
Total consideration transferred		6,079

Identifiable assets acquired and liabilities assumed
Working capital^(a)		721
Property, plant and equipment		2,164
Identifiable intangible assets		1,665
Other assets		4
Other long-term liabilities		(837	)
Goodwill		2,362
Net assets acquired and liabilities assumed	$	6,079
^(a) Includes a $58 million step up of inventory to fair value

To finance the purchase, the Company issued $1,250 million aggregate principal amount of first priority senior secured notes due 2026, $500 million aggregate principal amount of second priority senior secured notes due 2027, and entered into incremental term loans due July 2026, to fund the remainder of the purchase price.

When including RPC results for the periods prior to the acquisition date, unaudited pro forma net sales and net income were $3.1 billion and $61 million, respectively, for the quarterly period ended March 30, 2019 and $6.3 billion and $169 million, respectively, for the two quarterly periods ended March 30, 2019. The unaudited pro forma net sales and net income assume that the RPC acquisition had occurred as of the beginning of the period.

Seal For Life

In July 2019, the Company completed the sale of its Seal For Life ("SFL") business which was operated in our Health, Hygiene & Specialties reporting segment for net proceeds of $325 million. SFL recorded $96 million in net sales during fiscal 2019.