Acquisitions

Charter International plc

On January 13, 2012, Colfax completed the acquisition of Charter for a total purchase price of approximately $2.6 billion, comprised of $1.9 billion of cash consideration and $0.7 billion fair value of Colfax Common stock on the date of acquisition. Charter is a global industrial manufacturing company focused on welding, cutting and automation and air and gas handling. The acquisition has:


•	enhanced the Company’s business profile by providing a meaningful recurring revenue stream and considerable exposure to emerging markets;


•	enabled Colfax to benefit from strong secular growth drivers, with a balance of short- and long-cycle businesses; and


•	provided an additional growth platform in the fragmented fabrication technology industry.

The Charter Acquisition was accounted for using the acquisition method of accounting and accordingly, the Consolidated Financial Statements include the financial position and results of operations from the date of acquisition.

Other

The following acquisitions were accounted for using the acquisition method of accounting, except as otherwise noted, and, accordingly, the Consolidated Financial Statements include the financial position and results of operations from the respective date of acquisition:

Gas and Fluid Handling

On May 21, 2014, the Company completed the $0.8 million acquisition of the remaining ownership of Howden Thomassen Middle East FCZO (“Howden Middle East”), which resulted in an increase in the Company’s ownership of the subsidiary from 90% to 100% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On November 29, 2013, the Company completed the acquisition of the global infrastructure and industry division of Fläkt Woods Group (“GII”) for approximately $246.0 million, including the assumption of debt, subject to certain adjustments. GII has operations around the world and expanded the Company’s product offerings in the heavy duty industrial and cooling fan market.

On November 25, 2013, the Company converted the common shares of Sistemas Centrales de Lubrication S.A. de C.V. (“Sicelub”), previously a less than wholly owned subsidiary in which the Company did not have a controlling interest, that were held by the majority owner into shares of mandatorily redeemable non-voting preferred stock of Sicelub valued at $31.7 million at the acquisition date, which resulted in an increase in the Company’s ownership from 44% to 100%. On the date of the acquisition, the Company held a $7.4 million equity investment representing the Company’s 44% investment in Sicelub and recognized a $13.8 million gain as a reduction in Selling, general and administrative expense in the Consolidated Statement of Operations to remeasure the investment to fair value at the acquisition date based upon the total enterprise value, adjusting for a control premium. Changes in settlement value of the mandatorily redeemable preferred stock are determined, in part, by the achievement of certain performance goals. The change in the settlement value of the mandatorily redeemable preferred stock for each period will be reflected in Interest expense. During the year ended December 31, 2014, a $3.1 million reduction to Interest expense is reflected in the Consolidated Statement of Operations due to the change in expected settlement value under the conditions specified in the contract of the mandatorily redeemable preferred stock, as the performance criteria were not met.

On November 1, 2013, the Company completed the acquisition of ČKD Kompresory a.s. (“ČKDK”) for approximately $69.4 million, including the assumption of debt. ČKDK is a leading supplier of multi-stage centrifugal compressors to the oil & gas, petrochemical, power and steel industries, based in Prague, Czech Republic.

On September 30, 2013, the Company completed the acquisition of certain business units of The New York Blower Company, including TLT-Babcock Inc. (“TLT-Babcock”) and Alphair Ventilating Systems Inc. (“Alphair”) for an approximate aggregate purchase price of $55.7 million. TLT-Babcock and Alphair are suppliers of heavy duty and industrial fans in Akron, Ohio and Winnipeg, Manitoba, respectively.

On July 9, 2013, the Company completed the acquisition of the common stock of Clarus Fluid Intelligence, LLC (“Clarus”) for $13.2 million, which included the fair value of an estimated additional contingent cash payment of $2.5 million at the acquisition date. The additional contingent payment, if any, would be paid during the year ending December 31, 2016 subject to the achievement of certain performance goals. See Note 14, “Financial Instruments and Fair Value Measurements” for discussion regarding the Company’s liability for contingent payments. Clarus is a domestic supplier of flushing services for marine applications primarily to U.S. government agencies, with primary operations based in Bellingham, Washington.

On September 13, 2012, the Company completed the acquisition of the common stock of Co-Vent Group Inc. (“Co-Vent”) for $34.6 million. Co-Vent specializes in the custom design, manufacture, and testing of industrial fans, with its primary operations based in Quebec, Canada. As a result of this acquisition, the Company has expanded its product offerings in the industrial fan market.

Fabrication Technology

On July 1, 2014, the Company completed the $9.5 million acquisition of the remaining ownership of ESAB-SVEL (“Svel”), which resulted in an increase in the Company’s ownership from 51% to 100% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On April 14, 2014, Colfax completed the acquisition of the common stock of Victor Technologies Holdings, Inc. (“Victor”) for total net cash consideration of $948.8 million, subject to certain adjustments (the “Victor Acquisition”). Victor is a global manufacturer of cutting, gas control and specialty welding solutions. The acquisition complemented the geographic footprint of our fabrication technology segment and expanded our product portfolio into new segments and applications. The following table summarizes the Intangible assets acquired, excluding Goodwill as of April 14, 2014:



	Intangible Asset (In thousands)		Weighted-Average Amortization Period (Years)
	Intangible Asset (In thousands)		Weighted-Average Amortization Period (Years)

Customer relationships	$	291,800	12.83
Acquired technology	18,600		10.00
Other intangible assets	26,000		9.28
Total amortizable intangible assets	$	336,400	12.40
Trade names – indefinite life	$	53,300	n/a

On October 31, 2012, the Company completed the acquisition of approximately 91% of the outstanding common and investment shares of Soldex S.A. (“Soldex”) for approximately $187.2 million (the “Soldex Acquisition”). Soldex is organized under the laws of Peru and complements the Company’s existing fabrication technology segment by supplying welding products from its plants in Colombia and Peru. On August 5, 2013, the Company completed a $14.9 million tender offer for additional common and investment shares of Soldex. This resulted in an increase in the Company’s ownership of the subsidiary from approximately 91% to 99% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On April 13, 2012, the Company completed a $29.3 million acquisition of shares in ESAB India Limited, a publicly traded, less than wholly owned subsidiary in which the Company acquired a controlling interest in the Charter Acquisition. This resulted in an increase in the Company’s ownership of the subsidiary from 56% to 74%. This acquisition of shares was pursuant to a statutorily mandated tender offer triggered as a result of the Charter Acquisition and was accounted for as an equity transaction, as the Company increased its controlling interest.

In May 2012, the Company completed an $8.5 million acquisition, including the assumption of debt, of the remaining ownership of CJSC Sibes (“Sibes”), a less than wholly owned subsidiary in which the Company did not have a controlling interest. This resulted in an increase in the Company’s ownership of Sibes from 16% to 100%.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition for all acquisitions accounted for under the acquisition method of accounting and consummated during the years ended December 31, 2014, 2013 and 2012.



	2014			2013			2012
	(In thousands)
Trade receivables	$	76,678		$	74,387		$	714,486
Inventories	107,785			49,871			487,835
Property, plant and equipment	59,281			92,247			595,961
Goodwill	612,746			284,294			1,793,394
Intangible assets	389,700			104,272			794,333
Accounts payable	(34,271		)	(70,122		)	(391,131		)
Debt	—			(10,942		)	(437,564		)
Other assets and liabilities, net	(263,119		)	(99,205		)	(746,719		)
	948,800			424,802			2,810,595
Less: net assets attributable to noncontrolling interest	—			—			(259,329		)
Consideration, net of cash acquired	$	948,800		$	424,802		$	2,551,266

For the Victor Acquisition, the amounts represent the Company’s best estimate of the aggregate fair value of the assets acquired and liabilities assumed. These amounts are based upon certain valuations, studies and analyses that have yet to be finalized, and accordingly, the assets acquired and liabilities assumed, as detailed above, are subject to adjustment once the detailed analyses are completed. During the measurement period for the Victor Acquisition, the Company has made aggregate retrospective adjustments of $7.1 million during the year ended December 31, 2014, to provisional amounts that were recognized at the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The aggregate adjustments decreased the Goodwill balance and primarily relate to the Company’s valuation of intangible assets. Substantially all of the Goodwill recognized in conjunction with the Victor Acquisition is not expected to be deductible for income tax purposes.

During the three months ended December 31, 2013, the Company completed four acquisitions: GII, Sicelub, ČKDK, TLT-Babcock and Alphair. During the year ended December 31, 2014, the Company retrospectively adjusted provisional amounts with respect to these four acquisitions that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The aggregate adjustments for the year ended December 31, 2014 of $25.4 million increased the Goodwill balance and are summarized below.



	Acquisition Date Fair Values (Provisional)			Measurement Period			Acquisition Date Fair Values (Final)
	2013			Adjustments			2013
	(In thousands)
Trade receivables	$	80,258		$	(5,871	)	$	74,387
Inventories	53,551			(3,680		)	49,871
Property, plant and equipment	94,258			(2,011		)	92,247
Goodwill	258,901			25,393			284,294
Intangible assets	104,272			—			104,272
Accounts payable	(68,308		)	(1,814		)	(70,122		)
Debt	(10,942		)	—			(10,942		)
Other assets and liabilities, net	(87,188		)	(12,017		)	(99,205		)
Consideration, net of cash acquired	$	424,802		$	—		$	424,802

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the individually significant acquisitions consummated, and all of the others collectively, during the year ended December 31, 2012:



	Charter			Soldex			Other			Total 2012
	(In thousands)
Trade receivables	$	683,976		$	22,848		$	7,662		$	714,486
Inventories	449,906			32,985			4,944			487,835
Property, plant and equipment	562,129			28,921			4,911			595,961
Goodwill	1,649,159			116,696			27,539			1,793,394
Intangible assets	715,643			65,325			13,365			794,333
Accounts payable	(378,114		)	(6,682		)	(6,335		)	(391,131		)
Debt	(399,466		)	(36,734		)	(1,364		)	(437,564		)
Other assets and liabilities, net	(706,052		)	(33,654		)	(7,013		)	(746,719		)
	2,577,181			189,705			43,709			2,810,595
Less: net assets attributable to noncontrolling interest	(241,201		)	(18,128		)	—			(259,329		)
Consideration, net of cash acquired	$	2,335,980		$	171,577		$	43,709		$	2,551,266

In connection with the Charter Acquisition, the Company incurred advisory, legal, valuation and other professional service fees, termination payments to Charter executives and realized losses on acquisition-related foreign exchange derivatives, which comprised Charter Acquisition-related expense in the Consolidated Statements of Operations. See Note 14, “Financial Instruments and Fair Value Measurements” for additional information regarding the Company’s derivative instruments. Excluding Charter Acquisition-related expenses, the Company incurred advisory, legal, valuation and other professional service fees of $2.7 million, $4.3 million and $3.1 million, during the years ended December 31, 2014, 2013 and 2012, respectively, in connection with completed acquisitions which are included in Selling, general and administrative expense in the Consolidated Statements of Operations.

During the period from April 14, 2014 through December 31, 2014, the Company’s Consolidated Statements of Operations included $347.3 million and $35.9 million of Net sales and Net income available to Colfax Corporation common shareholders, respectively, associated with the Victor Acquisition. During the year ended December 31, 2013, the Company’s Consolidated Statements of Operations included $59.9 million of Net sales associated with the acquisitions consummated during 2013. Net Income available to common shareholders associated with acquisitions consummated during year ended December 31, 2013 was not material. During the year ended December 31, 2012, the Company’s Consolidated Statements of Operations included $3.2 billion and $21.6 million of Net sales associated with the acquisitions of Charter and Soldex, respectively. The Net loss attributable to Colfax Corporation common shareholders for Soldex included in the Consolidated Statements of Operations for the year ended December 31, 2012 was $1.7 million. Due to the refinancing of the Company's borrowing arrangements, the restructuring of the Corporate function of both entities into a single corporate office and numerous other shared resources given the scale of the Charter Acquisition, quantification of the earnings included in the consolidated income statement for the year ended December 31, 2012 related to Charter is impracticable.