Note 14. Acquisition

On the Closing Date, the Company completed the Acquisition of all the issued and outstanding paid-up share capital of HGST from Hitachi Ltd. (“Hitachi”). HGST is a developer and manufacturer of storage devices. As a result of the Acquisition, HGST became an indirect wholly-owned subsidiary of the Company. The aggregate purchase price of the Acquisition was approximately $4.7 billion and was funded with $3.7 billion of existing cash and cash from new debt, as well as 25 million newly issued shares of the Company’s common stock with a fair value of $877 million. The fair value of the newly issued shares of the Company’s common stock was determined based on the closing market price of the Company’s shares of common stock on the date of the Acquisition, less a 10% discount for lack of marketability as the shares issued were subject to a restriction that limited their trade or transfer for one year from the Closing Date. The purchase price consideration originally included preliminary estimates of the working capital assets acquired and liabilities assumed. Based on a final post-closing adjustment, the cash portion of the purchase price decreased by a net $27 million as a result of $37 million received by the Company during 2013 for a post-closing adjustment related to changes in the working capital of HGST, partially offset by $10 million paid by the Company during 2013 for a post-closing assumed pension adjustment. The aggregate purchase price for HGST was comprised of (in millions):


	Mar. 8, 2012
Acquisition of all issued and outstanding paid-up share capital of HGST	$	4,585
Fair value of stock options, restricted stock-based awards and SARs assumed		102

Total	$	4,687

The Company identified and recorded the assets acquired and liabilities assumed at their estimated fair values at the Closing Date, and allocated the remaining value of approximately $1.8 billion to goodwill. The values assigned to the acquired assets and liabilities were finalized prior to March 8, 2013, which was the final date of the 12 month measurement period following the date of the Acquisition. The final purchase price allocation was as follows (in millions):


	Mar. 8, 2012
Tangible assets acquired and liabilities assumed:
Cash and cash equivalents	$	194
Accounts receivable		1,290
Inventories		721
Other current assets		219
Property, plant and equipment		1,813
Other non-current assets		66
Accounts payable		(841	)
Accrued liabilities		(594	)
Debt assumed		(585	)
Pension and other post-retirement benefit liabilities		(130	)
Other liabilities		(102	)
Intangible assets		833
Goodwill		1,803

Total	$	4,687

In 2013, the Company recorded a net $21 million decrease in the purchase price allocation to goodwill as a result of a $37 million decrease in goodwill related to the completion of the post-closing adjustment for changes in working capital, partially offset by increases to goodwill of $10 million for the post-closing assumed pension adjustment, $5 million in deferred income taxes and $1 million in intangible assets.

Toshiba Transactions

In connection with the regulatory approval process, the Company announced on May 15, 2012 that it had closed a transaction with Toshiba to divest certain 3.5-inch hard drive assets and to purchase Toshiba Storage Device (Thailand) Company Limited (“TSDT”), a wholly-owned subsidiary of Toshiba which manufactured hard drives prior to the Thailand flooding. The net impact of these two transactions was immaterial to the Company’s consolidated financial statements. In August 2013, the Company received a $45 million insurance recovery related to facilities acquired in connection with the acquisition of TSDT.

Maintenance of Competitive Requirement

In connection with the regulatory approval process of the Acquisition, the Company agreed to certain conditions required by the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), including adopting measures to maintain HGST as an independent competitor until MOFCOM agrees otherwise (with the minimum period being two years from the Closing Date). The Company worked closely with MOFCOM to finalize an operations plan that outlines in more detail the conditions of the competitive requirement.