Acquisition of MPC Capital

12 Months Ended

Dec. 31, 2024

Acquisition of MPC Capital [Abstract]

8.	Acquisition of MPC Capital

On December 16, 2024, Castor Maritime Inc., through Thalvora Holdings GmbH, completed the acquisition of 26,116,378 shares of common stock of MPC Capital, representing 74.09% of MPC Capital’s outstanding common stock, for a cash price of €7.00 per share, equivalent to aggregate consideration of $191,977,316, excluding transaction related costs. MPC Capital is a public limited liability company incorporated and domiciled in Germany and is listed on the Scale Segment of the German Stock Exchange in Frankfurt/Main since 2000. Acquisition related costs amounted to $7,017,535 and are included in the general and administrative expenses in the accompanying consolidated statement of comprehensive income.

The Company has elected to apply pushdown accounting to the MPC Capital subsidiary. The new basis of accounting was established by the Company for the individual assets and liabilities of the subsidiary that were acquired using the acquisition method of accounting.

The following table summarizes the preliminary allocation of the fair value of MPC Capital’s assets, liabilities and noncontrolling interest as at December 16, 2024:

Assets acquired
Cash and cash equivalents	$	28,026,596
Account receivable trade, net		3,365,268
Due from related parties		9,779,850
Prepaid expenses and other assets		912,152
Income tax receivable		11,941,846
Assets held for sale		35,246,768
Derivative Assets		1,297,985
Property and equipment, net		2,075,104
Operating lease right-of-use assets		7,882,948
Intangible assets, net		19,574,760
Goodwill		18,079,618
Equity method investments		50,920,542
Equity method investments measured at fair value		113,694,883
Equity investments		5,228,041
Prepaid expenses and other assets		205,824
Deferred tax assets		1,841,537
Total assets acquired		310,073,722

Liabilities assumed
Current portion of long-term debt, net		1,061,812
Accounts payable		616,988
Accrued liabilities		15,123,454
Due to related parties		203,177
Liabilities directly associated with assets held for sale		18,065,703
Derivative liabilities		1,520,984
Income tax payable		7,062,263
Operating lease liabilities		1,064,277
Long-term debt, net		2,625,300
Accrued liabilities		167,522
Operating lease liabilities		6,818,672
Deferred tax liabilities		8,142,701
Total liabilities assumed		62,472,853

Noncontrolling interests		55,623,553
Assets acquired less liabilities assumed and noncontrolling interests	$	191,977,316

The fair value of the non-controlling interest on the acquisition date was based on the MPC Capital common stock price reported on the Scale Segment of the German Stock Exchange in Frankfurt/Main at the date of the acquisition and amounted to $54.7 million, which represented Level 1 inputs, and the fair value of the non-controlling shareholders at the level of the MPC Capital, amounted to $1.0 million.

Goodwill is calculated as the excess of the acquisition price of MPC Capital over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, knowledge base, continued innovation, and non-contractual relationships. Goodwill included in the MPC Capital segment constitutes a premium paid by the Company over the fair value of the net assets of MPC Capital, which is attributable to anticipated benefits from MPC Capital’s unique position as an asset management company. The goodwill is not tax deductible. Amortizable intangible assets comprise the brand with an estimated useful life of approximately 13 years, customer relationships with a weighted average useful life of approximately 25 years, order backlog with a weighted average useful life of approximately 6 years and a favorable contract with a weighted average useful life of approximately 5 years (see further information about intangible assets in Note 10).

The changes in the carrying amount of goodwill for the year ended December 31, 2024, are as follows.

	Asset management segment
Balance as of December 31, 2023	$	—
Goodwill acquired during year		18,079,618
Net exchange differences during year		(147,375	)
Balance as of December 31, 2024	$	17,932,243

As of December 31, 2024, the valuation related to the acquisition of MPC Capital is not final, and the acquisition price allocation is preliminary and subject to revision. The primary areas of the acquisition price allocation that are not yet finalized are related to certain property and equipment, intangible assets, liabilities and tax balances.

The determination of the fair values of the acquired assets and liabilities (and the determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. The contingent liabilities recognized as a result of the pushdown accounting were measured using the probability -weighted settlement amount in accordance with ASC 450 (see Note 17). The fair value of the trade receivables and trade receivables due from related parties include provision for doubtful accounts amounted to $449,556 and $8,984,028, respectively. No credit loss expenses were recognized during the reporting period. There are no purchased financial assets with credit deterioration. The most significant portion of the investments measured at fair value are equity methods investments for which the fair value option was elected (see Note 11). These investments were measured using quoted prices (Level 1). Equity investments were measured at net asset value (“NAV”) as a practical expedient (see Note 15).

Intangible assets comprise primarily order backlog and non-contractual customer relationships relating to commercial ship management and maritime infrastructure. The valuation of these intangible assets is based on the Multi-Period Excess Earnings Method. The key assumptions underlying the valuation are the duration of existing contracts, useful lives of commercial ships underlying the management contracts, contractually agreed fee rates and expected conditions for future contracts, expected profit margins and present value factors based on capital market data. The discount rate was estimated at 6.6% reflecting the weighted average cost of capital (“WACC”).

Also intangible assets comprise the fair value of the brand ‘Harper Petersen’ as well as a favorable contract regarding the temporary usage of the brand ‘MPC’ which were determined via the relief from royalty method. The key assumptions underlying the valuation are the expected future brand-specific revenues, at arm’s length royalty rate based on benchmark data and present value factors derived on capital market data. The discount rate was estimated at 6.5% reflecting the WACC.

The amounts of revenue and net income of the MPC Capital since the acquisition date (December 16, 2024) and up to December 31, 2024 included in the consolidated income statement for the reporting period is as follows:

	Period December 16, 2024 to December 31, 2024
Revenue from services	$	1,174,376
Net income	$	2,473,733

Pro forma results of operations (unaudited) – The following unaudited pro forma financial data for the years ended December 31, 2023 and 2024, give effect to the acquisition of MPC Capital, as though the business combination had been completed at the beginning of each period:

	Year ended December 31,		Year ended December 31,
	2023		2024
Pro forma:
Revenue from services	$	29,369,293	$	33,271,100
Net income	$	11,389,624	$	72,013,106

The unaudited pro forma financial information is illustrative only and is not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of future consolidated result of operations or financial position following the acquisition. The pro forma information does not give effect to any potential revenue enhancement cost synergies or other operational efficiencies that could result from the acquisitions. The actual financial position and results of operations of the Company following the acquisition may differ from the unaudited pro forma financial information due to a variety of factors. The unaudited pro forma financial information is based upon available information and certain assumptions that management believes are reasonable. The actual results of the operations of MPC Capital are included in the consolidated financial statements of the Company only from the date of the acquisition.

At December 31, 2024, the Company performed its annual impairment testing for Goodwill and found that no impairment charge should be recorded.