3. Acquisitions

Acquisition of GOBA (the "GOBA Acquisition")

On July 2, 2018, the Company completed the GOBA Acquisition. GOBA is a leading provider of school and craft products in Mexico under the Barrilito^®brand. The GOBA Acquisition is expected to increase the breadth and depth of our distribution, especially with wholesalers and retailers throughout Mexico and complement our existing office products portfolio with a strong offering of school and craft products. The results of GOBA are included in the ACCO Brands International segment from July 2, 2018.

The purchase price paid at closing was Mex$796.8 million (US$39.9 million based on July 2, 2018 exchange rates), subject to working capital and other adjustments. The preliminary purchase price, net of cash acquired of $1.9 million, was $38.0 million. A portion of the purchase price (Mex$115.0 million ($5.8 million based on July 2, 2018 exchange rates)) is being held in an escrow account for a period of up to 5 years after closing in the event of any claims against the sellers under the stock purchase agreement. The Company may also make claims against the sellers directly, subject to limitations in the stock purchase agreement, if the escrow is depleted. The GOBA Acquisition and related expenses were funded by increased borrowing under our revolving facility.

For accounting purposes, the Company was the acquiring enterprise. The GOBA Acquisition is being accounted for as a purchase business combination and GOBA's results are included in the Company’s consolidated financial statements from July 2, 2018. The net sales for GOBA for the year ended December 31, 2018 were $19.7 million for the period from July 2, 2018 through December 31, 2018.

The following table presents the preliminary allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of GOBA Acquisition:



(in millions)	At July 2, 2018
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	39.9

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	9.8
Deferred tax liabilities	3.1
Other non-current liabilities	5.6
Fair value of liabilities assumed	$	18.5

Less fair value of assets acquired:
Cash acquired	1.9
Accounts receivable	30.0
Inventory	7.1
Property and equipment	0.6
Identifiable intangibles	10.3
Deferred tax assets	1.9
Other assets	4.2
Fair value of assets acquired	$	56.0

Goodwill	$	2.4

We are continuing our review of our fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date or learn that more information is not available. This measurement period will not exceed one year from the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill.

Our fair value estimate of assets acquired and liabilities assumed is pending the completion of several elements, including the final determination of purchase price related to the settlement of differences in working capital, and the valuation of the fair value of the assets acquired and liabilities assumed and final review by our management. The primary areas that are not yet finalized relate to property, plant and equipment, contingent liabilities and income and other taxes. Accordingly, there could be material adjustments to our consolidated financial statements.

The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in these consolidated financial statements.

For the year ended December 31, 2018, transaction costs related to the GOBA Acquisition were $1.1 million. These costs were reported as interest and SG&A expenses in the Company's Consolidated Statements of Income.

Pro forma financial information is not presented due to immateriality.

Acquisition of Esselte Group Holdings AB (the "Esselte Acquisition")

On January 31, 2017, ACCO Europe Limited ("ACCO Europe"), an indirect wholly-owned subsidiary of the Company, completed the Esselte Acquisition. The Esselte Acquisition was made pursuant to the share purchase agreement, dated October 21, 2016, as amended (the "Purchase Agreement"), among ACCO Europe, the Company and an entity controlled by J. W. Childs (the "Seller").

As a result of the acquisition of Esselte, ACCO Brands become a leading European manufacturer and marketer of branded consumer and office products. The Esselte acquisition added the Leitz^®, Rapid^® and Esselte^® brands in the storage and organization, stapling, punching, business machines and do-it-yourself tools product categories to the Company's portfolio. The combination improved ACCO Brands’ scale and enhanced its position as an industry leader in Europe.

The purchase price paid at closing was €302.9 million (US$326.8 million based on January 31, 2017 exchange rates) and was subject to a working capital adjustment that reduced it by $0.3 million. The purchase price, net of cash acquired of $34.2 million, was $292.3 million. A warranty and indemnity insurance policy held by the Company and ACCO Europe insures certain of Seller’s contractual obligations to ACCO Europe under the Purchase Agreement for up to €40.0 million (US$43.2 million based on January 31, 2017 exchange rates) for a period of up to seven years, subject to certain deductibles and limitations set forth in the policy.

The Esselte Acquisition and related expenses were funded through a term loan of €300.0 million (US$320.8 million based on January 27, 2017 exchange rates) and cash on hand. See "Note 4. Long-term Debt and Short-term Borrowings" for details on these additional borrowings.

For accounting purposes, the Company was the acquiring enterprise. The Esselte Acquisition was accounted for as a purchase business combination and Esselte's results are included in the Company’s consolidated financial statements as of February 1, 2017. The January 2018 net sales for Esselte were $44.2 million.

The following table presents the allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of Esselte Acquisition:



(in millions)	At January 31, 2017
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	326.5

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	121.9
Deferred tax liabilities	83.6
Pension obligations	174.1
Other non-current liabilities	5.8
Fair value of liabilities assumed	$	385.4

Less fair value of assets acquired:
Cash acquired	34.2
Accounts receivable	60.0
Inventory	41.9
Property, plant and equipment	75.6
Identifiable intangibles	277.0
Deferred tax assets	106.3
Other assets	10.4
Fair value of assets acquired	$	605.4

Goodwill	$	106.5

In the fourth quarter of 2017, we finalized our fair value estimate of assets acquired and liabilities assumed as of the acquisition date.

The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The goodwill of $106.5 million is primarily attributable to synergies expected to be realized from facility integration, headcount reduction and other operational streamlining activities, and from the existence of an assembled workforce.

For the years ended December 31, 2017 and 2016, transaction costs related to the Esselte Acquisition were $5.0 million and $9.2 million, respectively. These costs were reported as SG&A expenses in the Company's Consolidated Statements of Income.

Acquisition of Australia Stationery Industries, Inc. (the "PA Acquisition")

On May 2, 2016, the Company completed the PA Acquisition, purchasing the remaining 50% interest in the former Pelikan Artline joint venture, which it did not already own. Prior to the PA Acquisition, the Company's investment in the Pelikan Artline joint venture was accounted for under the equity method. Pelikan Artline's product categories include writing instruments, notebooks, binding and lamination, visual communication, cleaning and janitorial supplies, as well as general stationery. Its industry-leading brands include Artline^®, Quartet^®, GBC^®, Spirax^® and Texta^®, among others.

In the PA Acquisition, ACCO Brands Australia Pty Limited and Bigadale Pty Limited (collectively, ''ACCO Australia"), two wholly-owned indirect subsidiaries of the Company, entered into a Share Sale Agreement (the "Agreement") with Andrew Kaldor, Cherington Investments Pty Ltd, Freiburg Nominees Proprietary Limited, Enora Pty Ltd and Bruce Haynes and certain Guarantors named therein (collectively, the "Seller Parties") to purchase directly or indirectly 100% of the capital stock of Australia Stationery Industries, Inc., which indirectly owned the 50% of the Pelikan Artline joint venture and the issued capital stock of Pelikan Artline Pty Limited (collectively "Pelikan Artline") that was not already owned by ACCO Brands Australia Pty Limited.

The purchase price was $103.7 million, net of working capital adjustments, and was $88.8 million, net of cash acquired.

Following completion of the PA Acquisition, ACCO Australia owns, directly and indirectly, 100% of Pelikan Artline. In addition to representations, warranties and covenants, the Agreement contains indemnification obligations and certain non-competition and non-solicitation covenants made by the Seller Parties in favor of ACCO Australia. A portion of the purchase price was allocated to fund the redemption of a 19.83% minority interest from a shareholder of a subsidiary of Pelikan Artline (the "Minority Interest Redemption"), which occurred shortly following the closing of the PA Acquisition.

The Company financed the PA Acquisition through increased borrowings under its then existing credit facility. See "Note 4. Long-term Debt and Short-term Borrowings" for details on these additional borrowings.

For accounting purposes, the Company is the acquiring enterprise. The PA Acquisition was accounted for as a purchase business combination and Pelikan Artline's results are included in the Company’s consolidated financial statements from the date of the PA Acquisition, May 2, 2016.

The Company’s previously held equity interest in the Pelikan Artline joint venture was remeasured to fair value at the date the controlling interest was acquired. The fair value of the previously held equity interest in the Pelikan Artline joint venture was determined by applying the income approach and using significant inputs that market participants would consider, including: revenue growth rates, operating margins, a discount rate and an adjustment for lack of control. The $28.9 million excess of the fair value of the previously held equity interest when compared to the carrying value was recognized as a gain in "Other expense (income), net” in the Consolidated Statements of Income.

The calculation of consideration given in the PA Acquisition is described in the following table.



(in millions)	At May 2, 2016
Purchase price, net of working capital adjustment	$	103.7
Fair value of previously held equity interest	69.3
Consideration for Pelikan Artline	$	173.0

The following table presents the allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of PA Acquisition:.



(in millions)	At May 2, 2016
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	103.7

Fair value of previously held equity interest	69.3

Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	21.7
Deferred tax liabilities	0.2
Debt	24.7
Other non-current liabilities	1.4
Fair value of liabilities assumed	$	48.0

Less fair value of assets acquired:
Cash acquired	14.9
Accounts receivable	27.0
Inventory	24.1
Property and equipment	2.2
Identifiable intangibles	58.0
Deferred tax assets	5.7
Other assets	8.6
Fair value of assets acquired	$	140.5

Goodwill	$	80.5

In the fourth quarter of 2016 we finalized our fair value estimate of assets acquired and liabilities assumed as of the acquisition date.

The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The goodwill of $80.5 million is primarily attributable to synergies expected to be realized from facility integration, headcount reduction and other operational streamlining activities, and from the existence of an assembled workforce.

For the year ended December 31, 2016, transaction costs related to the PA Acquisition were $1.3 million. These costs were reported as SG&A expenses in the Company's Consolidated Statements of Income.