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Acquisitions
 6 Months Ended
Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Acquisitions
2. Acquisitions
June Acquisition
On January 12, 2021, the Company acquired all of the remaining outstanding stock of June Life, Inc. ("June"), a smart appliance and technology company. The purpose of the acquisition was primarily to advance consumer experiences through the use of embedded technology in its products and higher quality digital products.
The composition of the purchase price recorded for June was as follows (dollars in thousands):
Cash$108,285 
Fair value of equity interest24,144 
Settlement of existing contractual relationship9,776 
Total$142,205 
Prior to the acquisition, the Company held an existing equity interest in June, which was historically accounted for as an equity method investment. Additionally, the Company had a license and development agreement with June to license certain software and other technology owned by June and adapt this technology to certain products of the Company. The license and development agreement included provisions for the Company to pay June royalties at varying rates based on the quantities and type of product sold containing the licensed technology. During the three months ended December 31, 2020, the Company recorded an equity method loss of $1.4 million, with an offsetting decrease in its investment in June. At acquisition, the Company remeasured the fair value of its existing equity interest, which exceeded the carrying amount of the investment and resulted in a pre-tax gain of $6.9 million. The gain offset with the equity method loss of $1.4 million was recorded within Gain from investments in unconsolidated affiliates during the six months ended March 31, 2021.
Upon completion of the merger agreement, June became a wholly-owned subsidiary of the Company. At the time of acquisition, the fair value of the existing equity interest totaled $24.1 million, which was based on per share prices paid to the sellers of common stock and preferred stock on acquisition.
The June license and development agreement, was deemed to be an existing contractual relationship. As a result of the business combination, the Company recorded this arrangement as consideration at its January 12, 2021 fair value, which resulted in an increase in goodwill of $9.8 million.
The results of operations for June have been included in the condensed consolidated statements of operations since the acquisition date, which were not material. June operations are reflected within the Americas reportable segment. Actual and pro forma revenue and results of operations for the acquisition have not been presented because they do not have a material impact to the Company’s net sales and results of operations, either individually or in aggregate.
The March 31, 2022 and September 30, 2021 condensed consolidated balance sheets include the assets and liabilities of June, which have been measured at fair value as of the acquisition date. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities.
The allocation of purchase price recorded for June was as follows (dollars in thousands):
Cash$6,046 
Inventory480 
Accounts receivable85 
Prepaid expenses and other current assets617 
Property and equipment104 
Intangibles109,700 
Goodwill53,193 
Accounts payable(870)
Accrued expenses(2,670)
Other long-term liabilities(24,480)
Total$142,205 
The above fair values of assets acquired and liabilities are based on the information that was available as of the reporting date.
The goodwill of $53.2 million represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including an experienced workforce and expected future synergies. None of the goodwill is expected to be deductible for tax purposes. In the first quarter of fiscal year 2022, the Company recorded a reduction to accrued expenses of $1.3 million, with a corresponding decrease to goodwill, resulting from a change in the fair value of a liability.
The Company recognized $24.5 million of deferred tax liabilities due to the acquisition of June. The deferred tax liabilities have been recorded in Other long-term liabilities in the condensed consolidated balance sheets.
The gross carrying amounts allocated to intangible assets were as follows (dollars in thousands):
Trade names and trademarks$17,000 
Developed software / patented technology87,000 
Non-competition / restrictive covenant agreements5,700 
Total$109,700 
The useful lives assigned to intangible assets were as follows (in years):
 
Useful
Lives
Trade names and trademarks20.0
Developed software / patented technology15.0
Non-competition / restrictive covenant agreements3.0
Total weighted average useful life15.2
Developed software/patented technology were valued using the multi-period excess earnings method (“MPEEM”). Intangible assets consisting of trade names and trademarks and non-competition/ restrictive covenant agreements were valued using the relief from royalty (“RFR”) method and lost income method, respectively. In many cases, the determination of fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change.
As a result of the acquisition, the Company recognized $1.2 million of acquisition-related costs.
RMC Acquisition
On April 1, 2021, the Company acquired all aspects of the operations of R McDonald Co. Pty. Ltd. (“RMC”), that supported the Company’s business units in Australia and New Zealand. This included certain fixed assets, members of the RMC workforce and their related employment liabilities and the reacquired right to sell and market the Company’s products. RMC, a marketing and distribution company, had historically provided operational and marketing support to
operate the Weber Australia and Weber New Zealand businesses on behalf of the Company. The primary purpose of the acquisition was to re-acquire those operational and marketing rights.
The composition of the purchase price recorded for RMC was as follows (dollars in thousands):
Cash$26,275 
Equity consideration issued by the Company14,582 
Total$40,857 
Prior to the acquisition, the Company had a preexisting contractual agreement with RMC which provided RMC the exclusive rights to sell, market, and distribute barbecue grills and accessories in Australia and New Zealand. With the acquisition, the effective settlement of this agreement resulted in the Company reacquiring rights to sell, market, and distribute products in Australia and New Zealand. In addition, RMC had a contractual agreement to provide administrative support services to the Company’s Australian and New Zealand businesses, as well as a licensing agreement for RMC to use certain trademarks of the Company. The transaction resulted in no gain or loss as the contractual terms of these agreements were at market.
The results of operations for RMC have been included in the condensed consolidated statements of operations since the acquisition date, which were not material. RMC operations are reflected within the Asia-Pacific (“APAC”) reportable segment. Actual and pro forma revenue and results of operations for the acquisition have not been presented because they do not have a material impact to the Company’s net sales and results of operations, either individually or in aggregate.
The March 31, 2022 and September 30, 2021 condensed consolidated balance sheets include the assets and liabilities of RMC, which have been measured at fair value as of the acquisition date. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities.
The allocation of purchase price recorded for RMC was as follows (dollars in thousands):
Property and equipment$432 
Reacquired rights14,300 
Other long-term assets410 
Goodwill27,120 
Accrued expenses(1,405)
Total$40,857 
The above fair values of assets acquired and liabilities are based on the information that was available as of the reporting date.
The goodwill of $27.1 million represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including an experienced workforce and expected future synergies. None of the goodwill is expected to be deductible for tax purposes. In the period subsequent to acquisition, the Company recorded a deferred tax asset of $0.4 million in its acquisition of RMC, with a corresponding decrease to goodwill.
The reacquired rights were valued using MPEEM. The useful life of the reacquired rights were estimated to be 3.3 years. The determination of fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change.
As a result of the acquisition, the Company recognized approximately $0.3 million of acquisition-related costs.