Acquisitions

Gatherco Merger

On April 1, 2015, we completed the merger in which Gatherco merged with and into Aspire Energy, our then newly formed, wholly-owned subsidiary. Aspire Energy is an unregulated natural gas infrastructure company with approximately 2,500 miles of pipeline systems in 40 counties throughout Ohio. The majority of Aspire Energy’s margin is derived from long-term supply agreements with Columbia Gas of Ohio and Consumers Gas Cooperative, which together serve more than 20,000 end-use customers. Aspire Energy sources gas primarily from 300 conventional producers. Aspire Energy also provides gathering and processing services necessary to maintain quality and reliability to its wholesale markets.

At closing, we issued 592,970 shares of our common stock, valued at $30.2 million, based on the closing price of our common stock as reported on the NYSE on April 1, 2015. In addition, we paid $27.5 million in cash and assumed $1.7 million of existing outstanding debt, which we paid off on the same date. We also acquired $6.8 million of cash on hand at closing.



(in thousands)	Net Purchase Price
Chesapeake Utilities common stock	$	30,164
Cash	27,494
Acquired debt	1,696
Aggregate amount paid in the acquisition	59,354
Less: cash acquired	(6,806		)
Net amount paid in the acquisition	$	52,548

The merger agreement provided for additional contingent cash consideration to Gatherco's shareholders of up to $15.0 million based on a percentage of revenue generated from potential new gathering opportunities during the five-year period following the closing. As of June 30, 2016, there have been no related gathering opportunities developed; therefore, no contingent consideration liability has been recorded. Based on the absence of related gathering opportunities being developed as of June 30, 2016, we are unable to estimate the range of undiscounted contingent liability outcomes at this time.

We incurred $1.3 million in transaction costs associated with this merger, $786,000 of which we incurred in 2014, and the remaining $514,000 we incurred during 2015. Transaction costs were included in operations expense in the accompanying condensed consolidated statements of income. The revenue and net income from this merger for the three months ended June 30, 2016, included in our condensed consolidated statements of income, were $4.8 million and $28,000, respectively. The revenue and net income from this merger for the six months ended June 30, 2016, included in our condensed consolidated statements of income, were $12.8 million and $1.7 million, respectively. This merger was accretive to earnings per share in the first full year of operations, generating $0.03 in additional earnings per share.

The purchase price allocation of the Gatherco merger was as follows:



	Purchase price
(in thousands)	Allocation
Purchase price	$	57,658

Property plant and equipment	53,203
Cash	6,806
Accounts receivable	3,629
Income taxes receivable	3,163
Other assets	425
Total assets acquired	67,226

Long-term debt	1,696
Deferred income taxes	13,409
Accounts payable	3,837
Other current liabilities	745
Total liabilities assumed	19,687
Net identifiable assets acquired	47,539
Goodwill	$	10,119

The excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed was recognized as goodwill at the merger date. The goodwill reflects the value paid primarily for opportunities for growth in a new, strategic geographic area. All of the goodwill from this merger was recorded in the Unregulated Energy segment and is not expected to be deductible for income tax purposes.

In December 2015 and during the first quarter of 2016, we adjusted the allocation of the purchase price based on additional information available. The adjustments resulted in a change in the fair value of property, plant and equipment, deferred income tax liabilities, inventory, income taxes receivable and other current liabilities. Goodwill from the merger decreased from $11.1 million to $10.1 million after incorporating these adjustments. The allocation of the purchase price and valuation of assets are final. The valuation of additional contingent cash consideration may be adjusted as additional information becomes available.