ACQUISITIONS AND DISPOSITIONS

6 Months Ended

Jun. 30, 2020

ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS AND DISPOSITIONS

3. ACQUISITIONS AND DISPOSITIONS

Acquisitions

The Company makes business acquisitions that align with its strategic business objectives. The assets and liabilities of acquired businesses are recorded in the Consolidated Balance Sheet at fair value as of their acquisition dates. The purchase price allocation is based on estimates of the fair value of assets acquired, liabilities assumed and consideration paid. The aggregate purchase prices of acquisitions are reduced for any cash or cash equivalents acquired.

Acquisitions during the first six months of 2020 and 2019 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

CID Lines Acquisition

On May 11, 2020, the Company acquired CID Lines for total consideration of $506.9 million in cash. CID Lines had annualized pre-acquisition sales of approximately $110 million and is a leading global provider of livestock biosecurity and hygiene solutions based in Belgium.

The CID Lines acquisition has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. Certain estimated values are not yet finalized and are subject to change. Measurement of certain carry over tax attributes, deferred income taxes, income tax uncertainties, certain tangible and intangible assets, and goodwill are not yet finalized and are subject to changes as the information necessary to complete the analyses is obtained and analyzed. The Company expects to finalize its purchase accounting within the year.

The Company incurred certain acquisition and integration costs associated with the transaction that were expensed and are reflected in the Consolidated Statement of Income. Further information related to the Company’s special (gains) and charges is included in Note 2.

The following table summarizes the preliminary value of CID Lines assets acquired and liabilities assumed as of the acquisition date.

(millions)	2020
Tangible assets		$54.5
Identifiable intangible assets
Customer relationships		147.5
Trademarks		58.6
Acquired technologies and product registrations		46.6
Total assets acquired		307.2
Goodwill		272.7
Total liabilities		94.4
Net consideration transferred to sellers		$485.5

Tangible assets are primarily comprised of accounts receivable of $30.8 million, property, plant and equipment of $7.4 million and inventory of $16.3 million. Liabilities primarily consist of deferred tax liabilities of $63.8 million and current liabilities of $30.6 million.

Customer relationships, trademarks, and other technology and product registrations are being amortized over weighted average lives of 14, 14, and 16 years, respectively.

Goodwill of $272.7 million arising from the acquisition consists largely of the synergies and economies of scale expected through adding complementary geographies and innovative products to the Food and Beverage industries. This acquired business became part of the Global Industrial reportable segment. None of the goodwill recognized is expected to be deductible for income tax purposes.

Other Acquisitions

Other than CID Lines, the Company did not close on any other business acquisitions during the first six months of 2020.

During the first six months of 2019, the Company acquired Bioquell, a life sciences business which sells bio-decontamination products and services to the Life Sciences and Healthcare industries. Effective with changes to the Company’s reporting structure in the first quarter 2020, this acquired business became part of the Global Healthcare and Life Sciences reportable segment. During 2018, the Company deposited $179.3 million (£140.5 million) in an escrow account that was released to the Company upon closing of the transaction in February 2019.

Also, during the first six months of 2019, the Company acquired Lobster Ink, a leading provider of end-to-end online customer training solutions. This acquired business became part of the Global Institutional reportable segment. The purchase price included an earn-out based on the achievement of certain revenue thresholds in any of the three years following the acquisition. The acquisition date fair value of the earn-out was reflected in the total purchase consideration exchanged for Lobster Ink and recorded as contingent consideration liability in the opening balance sheet during the Company’s purchase accounting. The earn-out has not yet been paid or settled and the contingent consideration liability is recorded within other liabilities as of June 30, 2020 at its current fair value.

These acquisitions have been accounted for using the acquisition method of accounting. The purchase accounting for both Bioquell and Lobster Ink were finalized in the first quarter of 2020 with insignificant purchase price adjustments recognized in the first quarter of 2020. There were other insignificant purchase price adjustments from other acquisitions recognized in the first six months of 2020.

The components of the cash paid for acquisitions other than CID Lines during the second quarter and first six months of 2020 and 2019 are shown in the following table.

	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2020		2019		2020		2019
Net tangible assets (liabilities) acquired and equity method investments		$-		$5.5		$-		$(9.4)
Identifiable intangible assets
Customer relationships		-		1.5		-		71.9
Trademarks		-		-		-		20.4
Other technology		-		-		-		45.9
Total intangible assets		-		1.5		-		138.2
Goodwill		-		0.3		-		180.5
Total aggregate purchase price		-		7.3		-		309.3
Acquisition-related liabilities and contingent considerations		-		-		-		(20.5)
Net cash paid for acquisitions, including acquisition-related
liabilities and contingent considerations		$-		$7.3		$-		$288.8

Additionally, during the first six months of 2020, the Company made $2.5 million of acquisition-related payments associated with prior transactions closed during the third and fourth quarters of 2019 for which purchase accounting has not yet been finalized. The payments primarily consist of the release of holdback liabilities and payment of contingent consideration.

The weighted average useful life of identifiable intangible assets acquired during the first six months of 2019 was 12 years.

Dispositions

In the second quarter of 2020, the Company completed the sale of Holchem, a U.K. based supplier of hygiene and cleaning products and services for the food and beverage, foodservice and hospitality industries for total consideration of $106.6 million. Consideration consisted of $55.4 million of cash and $51.2 million in notes receivable recorded at fair value. After the recognition of transaction costs, the Company recognized an after-tax loss of $16.3 million, which is classified within special charges in the Consolidated Statement of Income. Annual sales of Holchem were approximately $55 million and were included in the Global Industrial reportable segment prior to disposition. Further information related to the Company’s special (gains) and charges is included in Note 2.