BUSINESS COMBINATIONS

6 Months Ended

Apr. 03, 2020

During April 2019, Varex completed the acquisition of approximately 98.2% of the outstanding shares of common stock of Direct Conversion AB (publ) (“Direct Conversion”) for $69.5 million in cash, net of cash acquired, the assumption of Direct Conversion's debt of $4.5 million and deferred consideration equal to $9.9 million or 0.3 million shares of the Company’s common stock. To settle the deferred consideration, in April 2020, the Company issued the 0.3 million shares of its common stock to certain shareholders of Direct Conversion. In issuing the shares, the Company relied on the exemptions from registration under Section 4(a)(2) of the Securities Act of 1933 (the“Securities Act”), Rule 506 of Regulation D, and/or Regulation S promulgated under the Securities Act.

The acquisition of Direct Conversion expands our detector product portfolio to include photon counting technology. This technology will allow Varex to expand its range of imaging applications and offer new solutions to both Medical and Industrial customers.

The following table summarizes the purchase price allocation:


(In millions)	Fair Value
Allocation of the purchase consideration:
Accounts receivable	$	2.4
Inventories	5.7
Prepaid expenses and other current assets	0.7
Property, plant, and equipment	0.9
Goodwill	47.2
Intangible assets	32.9
Total assets acquired	$	89.8
Accounts payable	$	(1.0)
Accrued liabilities and other current liabilities	(1.5)
Current maturities of long-term debt	(1.0)
Deferred revenues	(0.9)
Long-term debt	(3.5)
Other long-term liabilities	(1.1)
Total liabilities assumed	$	(9.0)
Noncontrolling interest	$	(1.4)
Net assets acquired, less noncontrolling interest	$	79.4
Net cash paid	$	69.5
Deferred consideration	9.9
Total consideration	$	79.4

The Company recorded the assets acquired and liabilities assumed at their fair values. Intangibles were valued primarily using a discounted cash flow, which included estimated revenue growth and discount rate. The fair value assigned to goodwill is primarily attributable to expected synergies. The goodwill related to the Direct Conversion acquisition is not tax deductible.

The following amounts represent the determination of the fair value and estimated weighted average useful lives of identifiable intangible assets for the Direct Conversion, which are amortized using the straight-line method:


(In millions)	Fair Value		Estimated Weighted Average Useful Life (In Years)
Backlog	$	0.2	1
Trade names	2.5		5
Developed technology	18.4		10
In-process research and development	2.8		indefinite
Customer relationships	9.0		10
Total intangible assets acquired	$	32.9