Business Combinations

Mold-Masters

On March 28, 2013, the Company acquired all the outstanding equity interests of Mold-Masters, a leading global manufacturer of a comprehensive line of plastic delivery and precision control systems for injection molding applications, subject to a working capital settlement. With the acquisition of Mold-Masters, the Company was able to enhance its capabilities to provide a broader set of plastic processing technology solutions for the plastic processing industry, including its hot runner and process control systems, mold bases and components, and MRO supplies. The acquisition of Mold-Masters also expands the Company’s sales from recurring consumable products and provides further geographical diversification into emerging markets. The consideration, net of cash, to acquire Mold-Masters was $965.5 million. On March 28, 2013, the Company paid cash consideration of approximately $920.5 million and subsequently paid an additional $42.4 million of consideration through December 31, 2013. The remaining balance of $2.6 million still outstanding as of December 31, 2013 was paid during 2014. Simultaneous with the acquisition of Mold-Masters, the Company issued $708.8 million of long-term debt (see Note 5) and received $289.2 million from certain of its equity holders to fund the Mold-Masters Acquisition.

The Company accounted for the acquisition of Mold-Masters using the acquisition method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective estimated fair values. The following table summarizes the values of the assets acquired and liabilities assumed at the date of acquisition (in millions):



Accounts receivable	$	54.5
Total inventories	29.2
Prepaid and other current assets	11.6
Property and equipment	79.6
Intangible assets	419.4
Goodwill	478.6
Other noncurrent assets	0.4
Accounts payable	(12.2		)
Advanced billings and deposits	(3.6		)
Other current liabilities	(28.2		)
Deferred income tax liabilities	(62.6		)
Other noncurrent accrued liabilities	(1.2		)
Consideration, net of cash acquired	$	965.5

The Company’s Consolidated Financial Statements include Mold-Masters’ results of operations from the date of acquisition on March 28, 2013 through December 31, 2013. Net sales and operating earnings attributable to Mold-Masters during this period and included in the Company’s Consolidated Financial Statements for the year ended December 31, 2013 total $208.1 million and $21.5 million, respectively.

The following unaudited pro forma information gives effect to the Company’s acquisition of Mold-Masters as if the acquisition had occurred on January 1, 2012 and Mold-Masters had been included in the Company’s consolidated results of operations for the year ended December 31, 2013:



	Year Ended December 31, 2013
	(in millions)
Net sales	$	1,087.6
Net (loss) income attributable to Milacron Holdings Corp.	$	(36.1	)

The historical consolidated financial information of the Company and Mold-Masters has been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable and (3) expected to have continuing impact on the combined results.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce as well as several strategic benefits including a comprehensive portfolio of brands, complementary product offerings, enhanced global footprint and attractive synergy opportunities. Goodwill recognized as a result of the Mold-Masters Acquisition is not deductible for income tax purposes. See Note 3 for additional information regarding goodwill and other intangible assets.

2014 Acquisitions

During 2014, the Company completed five acquisitions including a U.S. manufacturer of turn-key, co-injection molding equipment and a high-precision component supplier to the plastics industry located in the Czech Republic. The acquisitions provide the Company with incremental scale to enable facility consolidation and also result in the addition of intellectual property related to hot runner system design and functionality. The total consideration, net of cash acquired, related to the acquisitions in 2014 was $50.4 million.

The Company accounted for the acquisitions using the acquisition method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective estimated fair values. The following table summarizes the values of the assets acquired and liabilities assumed at the date of acquisition (in millions):



Accounts receivable	$	2.7
Total inventories	4.8
Prepaid and other current assets	4.3
Property and equipment	10.2
Intangible assets	13.7
Goodwill	32.2
Accounts payable	(2.4		)
Advanced billings and deposits	(6.5		)
Other current liabilities	(4.1		)
Deferred income tax liabilities	(2.5		)
Other noncurrent accrued liabilities	(2.0		)
Consideration, net of cash acquired	$	50.4

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents several strategic benefits including a comprehensive portfolio of brands, complementary product offerings and attractive synergy opportunities. Goodwill recognized as a result of the acquisitions is not deductible for income tax purposes. See Note 3 for additional information regarding goodwill and other intangible assets.

CanGen Holdings Inc.

On December 1, 2015, the Company acquired all the outstanding equity interests of CanGen Holdings Inc. ("CanGen"), a supplier of highly engineered aftermarket process control components for extrusion and injection molding applications, subject to a working capital settlement. The total consideration, net of cash acquired, to acquire CanGen was $22.2 million.

The Company accounted for the acquisition using the acquisition method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective estimated fair values. The following table summarizes the preliminary values of the assets acquired and liabilities assumed at the date of acquisition (in millions):



Accounts receivable	$	2.8
Total inventories	1.9
Prepaid and other current assets	0.6
Property and equipment	2.3
Intangible assets	9.4
Goodwill	10.9
Accounts payable	(0.4		)
Other current liabilities	(1.2		)
Deferred income tax liabilities	(4.1		)
Consideration, net of cash acquired	$	22.2

Significant assumptions related to the valuations of assets and liabilities acquired during 2015, 2014 and 2013 include the following:

•

Inventory fair values were estimated by significant component. Raw materials were valued at current replacement costs and work-in-process was valued at the estimated selling prices of finished goods less the sum of costs to complete, costs of disposal and reasonable profit allowances for completing and selling efforts based on profits for similar finished goods. Finished goods were valued at estimated selling prices less the sum of costs of disposal and reasonable profit allowances for the selling efforts.


•	Property and equipment fair values were estimated at their highest and best use value, using a combination of the cost and market approaches. Several key factors affected the values by location, including physical deterioration and age, functional obsolescence and economic obsolescence.


•	Identified intangible assets include trademarks, technology, and customer relationships which were determined based on a combination of the income approach, the market approach and the cost approach.


•	Short-term borrowing, long-term debt and capital lease obligation fair values were determined using a discounted cash flow basis and approximates face value, as most of the Company’s debt bears a floating interest rate or was issued on the Acquisition Date.

Acquisition related costs were expensed as incurred and included legal fees and advisory services. The Company incurred acquisition related costs of $0.4 million and $1.1 million for the years ended December 31, 2015 and 2014, respectively, and $2.9 million for the year ended December 31, 2013, net of a gain on a foreign currency hedge related to the Mold-Masters Acquisition. These costs are included in other expense, net within the Consolidated Statement of Operations. In addition, the Company incurred incremental interest expense of $7.0 million for the year ended December 31, 2013 related to commitment fees associated with the financing of the Mold-Masters Acquisition.