Note 2 - Acquisitions

9 Months Ended

Aug. 27, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 2: Acquisitions

Cyberbond

On June 8, 2016, we acquired Cyberbond, L.L.C., heaquartered in Batavia, Illinois, which is a provider of industrial adhesives for the electronics, medical, audio equipment, automotive and structural markets. The acquisition will help us to broaden our global position and accelerate our growth in the high margin, high growth Engineering Adhesives segment.

The purchase price of $42,516 was funded through existing cash and was recorded in our Engineering Adhesives operating segment. We incurred acquisition related costs of approximately $558, which were recorded as selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

The acquisition fair value measurement was preliminary as of August 27, 2016, subject to the completion of the valuation of Cyberbond and further management reviews and assessment of the preliminary fair values of the assets acquired and liabilities assumed. We expect the fair value measurement process to be completed in the fourth quarter of 2016.

The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	August 27, 2016
Current assets	$	4,410
Property, plant and equipment		1,460
Goodwill		38,152
Other assets		673
Current liabilities		(1,526	)
Long-term liabilities		(653	)
Total purchase price	$	42,516

We have preliminarily allocated the entire excess purchase price to goodwill in the amount of $38,152 pending completion of the valuation of other identified intangible assets. Such goodwill is not deductible for tax purposes. The goodwill was assigned to our Engineering Adhesives operating segment. The Cyberbond acquisition does not represent a material business combination, therefore pro forma financial information is not provided.

Advanced Adhesives

On April 29, 2016, we acquired Advanced Adhesives Pty Limited and the business assets of Advanced Adhesives (New Zealand) Limited (Advanced Adhesives), providers of industrial adhesives in Australia and New Zealand. The acquisition will help us to strengthen our industrial adhesives market position and leverage a broader technology portfolio in both Australia and New Zealand. The combined purchase price of $10,365 was funded through existing cash and was recorded in our Asia Pacific operating segment. We incurred acquisition related costs of approximately $670, which were recorded as selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

During the third quarter of 2016, the Company substantially completed its procedures related to the working capital accounts and obtained a preliminary valuation of the identified intangible assets in order to allocate the purchase price to the assets acquired and liabilities assumed. The outcome of these procedures are reflected in the adjustments in the table below. The acquisition fair value measurement as of August 27, 2016, is subject to the completion of the final assessment of the fair values of the assets acquired and liabilities assumed, specifically related to the identified intangible assets. We expect the fair value measurement process to be completed in the fourth quarter of 2016.

The following table summarizes the fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	May 28, 2016			Adjustments			August 27, 2016
Current assets	$	6,197		$	(663	)	$	5,534
Property, plant and equipment		751			(167	)		584
Customer relationships		-			7,639			7,639
Trademarks		-			146			146
Goodwill		4,546			(4,546	)		-
Current liabilities		(2,371	)		(288	)		(2,659	)
Long-term liabilities		-			(879	)		(879	)
Total purchase price	$	9,123		$	1,242		$	10,365

The expected lives of the acquired intangible assets are 15 years for customer relationships and one year for trademarks.

Continental Products Limited

 

On February 3, 2015, we acquired the equity of Continental Products Limited, a provider of industrial adhesives, based in Nairobi, Kenya. The purchase price of $1,647, net of cash acquired of $371, was funded through existing cash.

Tonsan Adhesive, Inc

.

On February 2, 2015, we acquired 95 percent of the equity of Tonsan Adhesive, Inc., an independent engineering adhesives provider based in Beijing, China. The purchase price was 1.4 billion Chinese renminbi, or approximately $215,925, net of cash acquired of $7,754, which was financed with the proceeds from our October 31, 2014 term loan, drawn in conjunction with the acquisition.

Concurrent with the acquisition, we entered into an agreement to acquire the remaining 5 percent of Tonsan’s equity beginning February 1, 2019 for 82 million Chinese renminbi or approximately $13,038. In addition, the agreement requires us to pay up to 418 million Chinese renminbi or approximately $66,848 in contingent consideration based upon a formula related to Tonsan’s gross profit in fiscal 2018. The fair values of the agreement to purchase the remaining equity and the contingent consideration based upon a discounted cash flow model as of the date of acquisition were $11,773 and $7,714, respectively. See Note 14 for further discussion of the fair value of the contingent consideration.

The following table summarizes the fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Amount
Current assets	$	49,839
Property, plant and equipment		59,142
Goodwill		125,790
Other intangibles
Developed technology		18,600
Customer relationships		25,700
Trademarks/trade names		11,000
Current liabilities		(38,068	)
Other liabilities		(24,305	)
Redeemable non-controlling interests		(11,773	)
Total purchase price	$	215,925