Business Acquisitions

12 Months Ended

Dec. 31, 2019

Effective January 1, 2019, the Company completed its acquisition of the remaining 67.5% equity of LTG. The transaction resulted in the consolidation of Thompsons Limited of Ontario, Canada and related entities as they were jointly owned by the Company and LTG in equal portions.

Total consideration transferred by the Company to complete the acquisition of LTG was $328.9 million. The Company paid $171.1 million in cash and $30.0 million of remaining purchase price holdback and other accrued liabilities, and issued 4.4 million unregistered shares valued at 127.8 million based upon the stock price of the Company at the date of the acquisition.

The purchase price allocation was finalized in the fourth quarter of 2019. A summarized purchase price allocation is as follows:



(in thousands)
Cash consideration paid	$	171,147
Equity consideration	127,841
Purchase price holdback/ other accrued liabilities	29,956
Total purchase price consideration	$	328,944

The final purchase price allocation at January 1, 2019, is as follows:



(in thousands)
Cash and cash equivalents	$	21,525
Accounts receivable	320,467
Inventories	456,963
Commodity derivative assets - current	82,595
Other current assets	27,474
Commodity derivative assets - noncurrent	13,576
Goodwill	126,610
Other intangible assets	112,900
Right of use asset	37,894
Equity method investments	28,728
Other assets, net	5,355
Property, plant and equipment, net	171,717
	1,405,804

Short-term debt	218,901
Trade and other payables	303,321
Commodity derivative liabilities - current	29,024
Customer prepayments and deferred revenue	99,530
Accrued expense and other current liabilities	66,109
Other long-term liabilities, including commodity derivative liabilities - noncurrent	3,175
Long-term lease liabilities	21,193
Long-term debt, including current maturities	161,689
Deferred income taxes	15,531
	918,473
Fair value of acquired assets and assumed liabilities	487,331

Removal of preexisting ownership interest, including associated cumulative translation adjustment	(159,459		)
Pretax loss on derecognition of preexisting ownership interest	1,072
Total purchase price consideration	$	328,944

The goodwill recognized as a result of the LTG acquisition is $126.6 million and is allocated to reporting units within the Trade Group segment. The portion of the goodwill that is deductible for tax purposes is $12.5 million. The goodwill recognized is primarily attributable to the addition of an assembled workforce and complementary assets with greater scale that significantly expands the Company's reach in the agricultural marketplace. Due to finalization of the purchase price accounting as well as certain working capital adjustments and deferred income taxes during the fourth quarter, Goodwill decreased $3.2 million, Other intangible assets increased $6.3 million, Deferred income tax liabilities increased $1.1 million and Accrued expenses increased $1.6 million.

Details of the intangible assets acquired are as follows:



(in thousands)			Estimated useful life
Customer relationships	$	92,400	10 years
Noncompete agreements	20,500		3 years
Total other intangible assets	$	112,900	8 years	*

*weighted average number of years

On October 1, 2019, The Andersons entered into an agreement with Marathon to merge TAAE, TACE, TAME and the Company's wholly-owned subsidiary, The Andersons Denison Ethanol LLC into a new legal entity, The Andersons Marathon Holdings LLC. As a result of the merger, The Andersons and Marathon now own 50.1% and 49.9% of the equity in TAMH, respectively. Total consideration transferred by the Company to complete the acquisition of TAMH was $182.9 million. The company transferred non-cash consideration of $7.3 million and its equity values of the previously mentioned LLCs.

The purchase price allocation is preliminary, pending completion of the full valuation report, finalization of deferred income taxes and working capital adjustments. A summarized preliminary purchase price allocation is as follows:



(in thousands)
Non-cash consideration	$	7,318
Investments contributed at fair value	124,662
Investment contributed at cost	50,875
Total purchase price consideration	$	182,855

The preliminary purchase price allocation at October 1, 2019, is as follows:



(in thousands)
Cash and cash equivalents	$	47,042
Accounts receivable	12,175
Inventories	31,765
Other current assets	2,638
Goodwill	2,726
Right of use asset	5,200
Other assets, net	861
Property, plant and equipment, net	321,380
	423,787

Trade and other payables	13,461
Accrued expense and other current liabilities	3,011
Other long-term liabilities	209
Long-term lease liabilities	2,230
Long-term debt, including current maturities	47,886
	66,797
Marathon Noncontrolling Interest	174,135
Net Assets Acquired	$	182,855

Removal of preexisting ownership interest	$	(88,426	)
Pretax gain on derecognition of preexisting ownership interest	$	36,286

Asset and liability account balances in the opening balance sheet above include the previously consolidated TADE investment balances at carryover basis.

The $2.7 million of goodwill recognized is primarily attributable to expected synergies and the assembled workforce of TAMH. None of the goodwill is expected to be deductible for income tax purposes.

The fair value in the opening balance sheet of the 49.9% noncontrolling interest in TAMH was estimated to be $174.1 million. The fair value was estimated based on 49.9% of the total equity value of TAMH based on the transaction price for the 50.1% stake in TAMH, considering the consideration transferred noted above.

Pro Forma Financial Information (Unaudited)

The summary pro forma financial information for the periods presented below gives effect to the LTG and TAMH acquisitions as if they had occurred at January 1, 2018.



	Year ended December 31,
(in thousands)	2019			2018
Net sales	$	8,377,863		$	8,588,978
Net income	(24,475		)	77,007

Pro forma net income was also adjusted to account for the tax effects of the pro forma adjustments noted above using a statutory tax rate of 25%. The amount of LTG’s and Thompsons’ revenue and earnings included in the Company’s consolidated statement of operations for the period ended December 31, 2019 are not practicable to determine given the level of integration of LTG and Thompsons into the Company’s operations effective January 1, 2019. Additionally, the pro forma amounts for net income above have been adjusted to reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to Property, plant and equipment had been applied on January 1, 2019 and 2018 related to the TAMH merger. The amounts of revenue and earnings in the Company's consolidated income statement in relation to the TAMH merger, since the acquisition date are $50.7 million of net sales and $5.1 million of net loss at the Company's ownership level.

Pro forma financial information is not necessarily indicative of the Company's actual results of operations if the acquisition had been completed at the date indicated, nor is it necessarily an indication of future operating results. Amounts do not include any operating efficiencies or cost savings that the Company believes are achievable.