PCLI Acquisition

On October 29, 2016, our wholly-owned subsidiary, 9952110 Canada Inc., entered into an SPA with Suncor to acquire 100% of the outstanding capital stock of PCLI. The acquisition closed on February 1, 2017. Cash consideration paid at that time was approximately $862.0 million, or $1.125 billion in Canadian dollars. PCLI is located in Mississauga, Ontario, Canada and is a producer of lubricant products such as base oils, white oils, specialty products and finished lubricants. PCLI’s operations also include marketing of its products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China.

Aggregate consideration totaled approximately $904.3 million and consists of $862.0 million in cash paid to Suncor at acquisition, a closing date working capital settlement of $30.6 million that was paid to Suncor in the second quarter of 2017, an accrued payable in the amount of $6.5 million and $5.1 million, representing a portion of the fair value of replacement restricted stock unit awards issued to PCLI employees that relate to pre-acquisition services.

This transaction is accounted for as a business combination using the acquisition method of accounting, with the purchase price allocated to the fair value of the acquired PCLI assets and liabilities as of the February 1 acquisition date, with the excess purchase price recorded as goodwill assigned to our PCLI segment. This goodwill is not deductible for income tax purposes.

The following summarizes our preliminary value estimates of the PCLI assets and liabilities acquired:



	(in millions)

Cash and cash equivalents	$	21.6
Accounts receivable and other current assets	117.5
Inventories	213.0
Properties, plants and equipment	459.0
Goodwill	184.2
Intangibles and precious metals	119.0
Accounts payable and accrued liabilities	(89.0		)
Deferred income tax liabilities	(107.0		)
Other long-term liabilities	(14.0		)
Net assets acquired	$	904.3

Intangibles include trademarks, patents, technical know-how and customer relationships totaling $98.2 million that are being amortized on a straight-line basis over periods ranging from 10 to 20 years.

These values are preliminary and reflect revisions to our February 1, 2017 fair value estimates that were initially recorded during the first quarter of 2017. These estimated values are not final and may be subject to additional change once all needed information has become available and we complete our valuations.

Our consolidated financial and operating results reflect the PCLI operations beginning February 1, 2017. Our results of operations for the three months ended June 30, 2017 included PCLI revenues and net income of $309.6 million and $12.6 million, respectively, and $511.5 million and $21.1 million for the period from February 1, 2017 through June 30, 2017.

As of June 30, 2017, we have incurred $19.3 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses.