3.Business Combination

On July 31, 2015, the Company consummated a business combination (the “Business Combination”) pursuant to the Stock Purchase Agreement, dated April 30, 2015 (the “Purchase Agreement”), by and between the Company and Dow providing for the acquisition by the Company of the AgroFresh Business from Dow, resulting in AgroFresh Inc. becoming a wholly-owned, indirect subsidiary of the Company. The Company was not required to redeem any shares of its common stock in connection with the closing of the Business Combination (the “Closing”). In the Business Combination and pursuant to the Purchase Agreement, the Company paid the following consideration to Rohm and Haas Company (“Rohm and Haas”), a subsidiary of Dow: (i) 17,500,000 shares of common stock (the “Stock Consideration”) and (ii) $635 million in cash (the “Cash Consideration”).

In addition, Dow is entitled to receive in 2018 a deferred payment from the Company of $50 million, subject to the Company’s achievement of a specified average EBITDA level over the two year period from January 1, 2016 to December 31, 2017.

On July 31, 2015, in connection with, and as a condition to, the Closing, Dow, Rohm and Haas, AgroFresh Inc. and Boulevard entered into a Tax Receivables Agreement (the “Tax Receivables Agreement”). Pursuant to the Tax Receivables Agreement, the Company will pay annually to Dow 85% of the amount of the tax savings, if any, in U.S. Federal, state and local income tax or franchise tax that the Company actually realizes as a result of the increase in tax basis of the AgroFresh Inc. assets resulting from a section 338(h)(10) election that the Company and Dow made in connection with the Business Combination. While the amount and timing of any payments under the Tax Receivables Agreement will vary depending upon a number of factors, including the amount and timing of the Company’s income, the Company expects that during the anticipated term of the Tax Receivables Agreement the payments that the Company may make to Dow could be substantial. In addition, payments under the Tax Receivables Agreement will give rise to additional tax benefits and therefore to additional potential payments under the Tax Receivables Agreement. The term of the Tax Receivables Agreement commenced at the Closing and will continue until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the Tax Receivables Agreement for an amount based on an agreed value of payments remaining to be made under the Tax Receivables Agreement.

On July 31, 2015, in connection with, and as a condition to, the Closing, Dow, Rohm and Haas, the Company and Boulevard Acquisition Sponsor, LLC (the “Sponsor”) entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”). Pursuant to the Warrant Purchase Agreement, beginning on the Closing Date and ending on the date that is nine months after the Closing Date, the Company is required to purchase in the open market warrants issued in connection with the Public Offering, in an aggregate amount of $10 million, at a purchase price per warrant of no more than $1.25. If the Company has not purchased in the aggregate $10 million of warrants before April 30, 2016, the Sponsor may sell to the Company private placement warrants it holds at $1.00 per private placement warrant to satisfy the obligation (such private placement warrants, together with all other warrants purchased under the Warrant Purchase Agreement, the “Purchased Warrants”). Pursuant to the Warrant Purchase Agreement, the Company is required to issue to Rohm and Haas no later than April 30, 2016, warrants to purchase the Company’s common stock representing 66-2/3% of the Purchased Warrants at no cost to Rohm and Haas and on the same terms as the warrants issued in connection with the Public Offering. In the event that the Company has not issued to Rohm and Haas an aggregate of 6,000,000 warrants on or prior to April 30, 2016, (a) the Sponsor will be required to transfer to the Company, at no cost to the Company, the number of warrants equal to one-half of the difference between (i) 6,000,000 and (ii) the number of warrants issued by the Company to Rohm and Haas on or prior to such date (such difference between clauses (i) and (ii), the “Make-Up Warrant Amount”) and (b) the Company will be required to issue such number of warrants equal to the Make-Up Warrant Amount.

On December 17, 2015, the Company, Dow, Rohm and Hass and the Sponsor entered into a letter agreement (the “Letter Agreement”), modifying certain terms of the Warrant Purchase Agreement. The Letter Agreement provides that, notwithstanding anything to the contrary in the Warrant Purchase Agreement, (i) the Company shall have no obligation to purchase any of the Company’s public warrants in the open market pursuant to the Warrant Purchase Agreement and (ii) the Sponsor irrevocably waives its right to sell to the Company private placement warrants at $1.00 per private placement warrant pursuant to Section 1 of the Warrant Purchase Agreement.

In addition, pursuant to the terms of the Purchase Agreement, the amount of the Cash Consideration paid as part of the purchase price is subject to adjustment following the Closing based upon the working capital of the AgroFresh Business as of the Closing Date being greater or less than a target level of working capital determined in accordance with the Purchase Agreement.

The Company accounted for its acquisition of the AgroFresh Business as a business combination under the scope of FASB Accounting Standard Codification Topic (ASC) 805, Business Combinations, or ASC 805. Pursuant to ASC 805, the Company has been determined to be an accounting acquirer since the Company paid cash and equity consideration for all of the assets of the AgroFresh Business. The AgroFresh Business constitutes a business with inputs, processes and outputs. Accordingly, the acquisition of the AgroFresh Business constitutes the acquisition of a business in accordance with ASC 805 and is accounted for using the acquisition method.

The following summarizes the purchase consideration paid to Dow, adjusted for measurement period adjustments:

(in thousands)	Calculation of Purchase Price (As Initially Reported)		Measurement Period Adjustments		Calculation of Purchase Price (As Adjusted)
Cash consideration	$	635,000	$	—	$	635,000
Stock consideration (1)	210,000		—		210,000
Warrant consideration (2)	19,020		—		19,020
Deferred payment (3)	17,172		—		17,172
Tax amortization benefit contingency (4)	145,174		8,784		153,958
Working capital payment to Dow (5)	—		15,057		15,057

Total purchase price	$	1,026,366	$	23,841	$	1,050,207

(1)

The Company issued 17,500,000 shares of common stock valued at $12.00 per share as of July 31, 2015.

(2)

As discussed above, the Company entered into a Warrant Purchase Agreement whereby it agreed to issue to Dow a certain number of warrants by April 30, 2016. The Company calculated the fair value of the 6,000,000 warrants expected to be issued to Dow at $3.17 per warrant as of July 31, 2015.

(3)

As discussed above, the Company agreed to pay Dow a deferred payment of $50 million subject to the achievement of a specified average adjusted EBITDA level over the two year period from January 1, 2016 to December 31, 2017. The Company estimated the fair value of the deferred payment using the Black-Scholes option pricing model.

(4)

As discussed above, the Company entered into a Tax Receivables Agreement with Dow. The Company estimated the fair value of future cash payments based upon its estimate that the undiscounted cash payments to be made total approximately $334.0 million and are based on an estimated intangible write-up amortized over 15 years, tax effected at 37%, with each amortized amount then discounted to present value utilizing an appropriate market discount rate to arrive at the estimated fair value of the cash payments and the associated liability.

(5)

As discussed above, pursuant to the terms of the Purchase Agreement, the amount of the Cash Consideration paid as part of the purchase price was subject to adjustment following the Closing based upon the working capital of the AgroFresh Business as of the Closing Date being greater or less than a target level of working capital determined in accordance with the Purchase Agreement.

The final working capital adjustment is subject to negotiation between the Company and Dow, and any adjustment could have a material impact on the preliminary determination of the total purchase price disclosed above. In addition, any change in the working capital adjustment will affect the initial value of the tax amortization benefit contingency obligation and the deferred taxes.

The Company recorded an allocation of the purchase price to the AgroFresh Business’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 31, 2015 closing date. The following table summarizes the fair values of the net assets acquired as of the July 31, 2015 acquisition date adjusted for measurement period adjustments:

(in thousands)	Preliminary Purchase Price Allocation (As Initially Reported)			Measurement Period Adjustments			Preliminary Purchase Price Allocation (As Adjusted)
Cash and cash equivalents	$	9,459		$	—		$	9,459
Inventories	129,062			(7,779		)	121,283
Accounts receivable and other receivables	30,710			174			30,884
Prepaid expenses and other current assets	359			617			976

Total current assets	169,590			(6,988		)	162,602
Property and equipment	4,364			—			4,364
Identifiable intangible assets	836,044			5,501			841,545
Noncurrent deferred tax asset	401			11,448			11,849
Other assets	862			—			862

Total identifiable assets acquired	1,011,261			9,961			1,021,222
Accounts payable	(364		)	—			(364		)
Accrued expenses and other current liabilities	(7,746		)	(1,678		)	(9,424		)
Pension and deferred compensation	(712		)	74			(638		)
Deferred tax liability	(14,772		)	—			(14,772		)
Other liabilities	(1,033		)	1,033			—
Accrued liabilities — noncurrent	(1,823		)	—			(1,823		)

Net identifiable assets acquired	984,811			9,390			994,201
Goodwill	41,555			14,451			56,006

Total purchase price	$	1,026,366		$	23,841		$	1,050,207

The measurement period adjustments reflect new information obtained about facts and circumstances that existed at the Closing Date, primarily related to inventories, intangible assets, and the working capital payment. As discussed in Note 2, the Company has early adopted ASU No. 2015-16, which requires an acquirer to recognize measurement period adjustments during the period in which the amounts are determined, including the effect on earnings of any amounts that would have been recorded in previous period. These measurement period adjustments were recorded in the statements of (loss) income and statement of cash flows during the five months ended December 31, 2015. These adjustments did not have a material impact on the consolidated financial statements.

The values (in thousands) allocated to identifiable intangible assets and their estimated useful lives are as follows:

(in thousands, except useful life data)	Fair Value		Useful life
Software	$	45	4 years
Developed technology	757,000		12 to 22 years
Customer relationships	8,000		24 years
In-process research and development	39,000		Indefinite Life
Service provider network	2,000		Indefinite Life
Trade name	35,500		Indefinite Life

Total intangible assets	$	841,545

Weighted average life of definite-lived intangible assets			19.7

The goodwill of $56.0 million arising from the Business Combination is primarily attributable to the market position of the AgroFresh Business. This goodwill is not deductible for income tax purposes.

For the five months ended December 31, 2015 (Successor), the Company incurred approximately $1.8 million of transaction expenses directly related to the Business Combination.

The Company incurred $1.4 million of transaction expenses, not reported in the Predecessor consolidated statements of comprehensive (loss) income, directly related to the Business Combination for the seven months ended July 31, 2015 (Predecessor). Transaction expenses, which were $1.3 million through June 30, 2015 and $0.7 million for the fiscal year 2014, were reported by the Company in prior 10-Q and 10-K filings which are also not reported with the Predecessor consolidated statements of comprehensive (loss) income. Cash outflows of $1.2 million related to transaction expenses previously expensed by the Company are reported as cash outflows for operating activities for the five months ended December 31, 2015. In addition, in connection with the Business Combination, the Company paid deferred underwriter compensation of $7.8 million in connection with the Company’s Public Offering which is included as cash outflows for financing activities for the five months ended December 31, 2015.

The following unaudited pro forma combined financial information presents the Company’s results as though the Company and the AgroFresh Business had combined at January 1, 2013. The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP (in thousands):

	(Unaudited) (in thousands)
	Year Ended December 31, 2015 (pro forma)			Year Ended December 31, 2014 (pro forma)
Net sales	$	162,596		$	178,508
Net loss(1)	$	(19,756	)	$	(21,435	)

(1) Net loss in 2015 excludes the inventory step-up adjustment of $73.1 million and the mark-to-market adjustment on contingent consideration of $23.7 million.