Divestitures and Acquisitions

9 Months Ended

Sep. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

Embalagens Ltda.

On August 1, 2017, we entered into an agreement to sell our polystyrene food tray business in Guarulhos, Brazil for a gross purchase price of R$26.9 million (or $8.2 million as of the closing date of March 19, 2018). The purchase price was subject to working capital, cash and debt adjustments, which were finalized in the fourth quarter of 2018 for R$1.6 million (or $0.4 million). For the three and nine months ended September 30, 2018, the Company recognized an immaterial net loss and a net gain on the sale of $1.0 million, respectively, within other (expense) income, net on the Condensed Consolidated Statements of Operations.

Acquisitions

Automated Packaging Systems, LLC

On August 1, 2019 the Company acquired 100% of the limited liability company interest in Automated Packaging Systems, LLC, formerly Automated Packaging Systems, Inc. (APS), a leading manufacturer of automated bagging systems. The acquisition is included in our Product Care reporting segment. APS expands the breadth of the Company's automated solutions and sustainable packaging offerings and offers growth opportunities in the markets in which the Company serves.

Consideration exchanged for APS was $445.7 million. The preliminary opening balance sheet includes $58.2 million of assumed liabilities in connection with a deferred incentive compensation plan for APS' European employees. Sealed Air will make payments to deferred incentive compensation plan participants in approximately equal installments over the next three years.

The purchase price was primarily funded with proceeds from the incremental term facility provided for under an Amendment to our Credit Agreement, as described in Note 13, "Debt and Credit Facilities," of the Notes to Condensed Consolidated Financial Statements. For the three and nine months ended September 30, 2019, total transaction expenses recognized for the APS acquisition were $0.3 million and $2.8 million, respectively. These expenses are included within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes the consideration transferred to acquire APS and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed.



	Preliminary Allocation
(In millions)	As of August 1, 2019
Total consideration transferred	$	445.7

Assets:
Cash and cash equivalents	7.4
Trade receivables, net	37.3
Other receivables	8.9
Inventories, net	40.7
Prepaid expenses and other current assets	2.3
Property and equipment, net	79.3
Goodwill	261.3
Identifiable intangible assets, net	78.7
Other non-current assets	24.7
Total assets	$	540.6
Liabilities:
Current portion of long-term debt	2.6
Accounts payable	12.0
Other current liabilities	36.8
Long-term debt, less current portion	4.3
Other non-current liabilities	39.2
Total liabilities	$	94.9

Identifiable intangible assets, net is comprised of customer relationships, developed technology, trademarks and backlog. The estimated useful life of identifiable intangible assets is expected to be between 5 and 15 years, other than backlog which is expected to have a useful life less than 1 year. There are no indefinite lived intangible assets other than goodwill. The preliminary balance sheet is subject to adjustments and estimated useful lives are being finalized.

Goodwill is a result of the expected synergies and cross-selling opportunities this acquisition is expected to bring as well as the expected growth potential in APS' automated and sustainable solutions. Goodwill allocated to U.S. entities is expected to be deductible for tax purposes. Goodwill allocated to foreign entities is not expected to be deductible for tax purposes. The allocation between U.S. and non-U.S. entities is being finalized. The goodwill balance has been recorded to the Product Care reportable segment.

Other non-current assets includes the net overfunded position of a closed defined benefit pension plan in the United Kingdom. The plan does not have any material impact on the Company's overall defined benefit pension plans, including the weighted average of the key assumptions. Refer to Note 16, "Defined Benefit Pension Plans," of the Notes to Condensed Consolidated Financial Statements for more detail on the Company's other defined benefit pension plans.

The inclusion of APS in our consolidated financial statements is not deemed material with respect to the requirement to provide pro forma results of operations. As such, pro forma information is not presented.

Other Activity

During the second quarter of 2019, Food Care had acquisition activity resulting in a total purchase price paid of $23.4 million. The Company allocated the consideration transferred to the fair value of assets acquired and liabilities assumed, resulting in a preliminary allocation to goodwill of $6.0 million. Purchase price adjustments resulting in an increase to goodwill of $0.3 million were recorded in the third quarter. Identifiable intangible assets acquired were not material.

AFP, Inc.

On August 1, 2018, the Company acquired AFP, Inc., a leading, privately held fabricator of foam, corrugated, molded pulp and wood packaging solutions, to join its Product Care division. This acquisition further expands our protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. We acquired 100% of AFP shares for final consideration of $74.1 million, excluding cash acquired of $3.3 million.

The following table summarizes the consideration transferred to acquire AFP and the allocation of the purchase price among the assets acquired and liabilities assumed.



	Preliminary Allocation		Measurement Period			Final Opening Balance Sheet Allocation
(In millions)	As of August 1, 2018		Adjustments			As of September 30, 2019
Total consideration transferred	$	70.8	$	3.3		$	74.1

Assets:
Cash and cash equivalents	2.9		0.4			3.3
Trade receivables, net	30.8		—			30.8
Inventories, net	7.1		—			7.1
Prepaid expenses and other current assets	0.7		—			0.7
Property and equipment, net	3.5		(0.4		)	3.1
Goodwill	21.6		1.0			22.6
Identifiable intangible assets, net	18.6		0.7			19.3
Other non-current assets	0.7		(0.4		)	0.3
Total assets	$	85.9	$	1.3		$	87.2
Liabilities:
Current portion of long-term debt	—		0.1			0.1
Accounts payable	13.8		(2.2		)	11.6
Other current liabilities	1.3		(0.1		)	1.2
Long-term debt, less current portion	—		0.2			0.2
Total liabilities	$	15.1	$	(2.0	)	$	13.1

The following tables summarizes the identifiable intangible assets, net and their useful life.



	Amount		Useful life
	(in millions)		(in years)
Customer relationships	$	14.9	11
Trademarks and tradenames	4.4		5
Total intangible assets with definite lives	$	19.3

The goodwill allocated to the U.S. entities in the purchase is deductible for tax purposes.