Acquisitions and Divestitures

9 Months Ended

Sep. 28, 2019

ACQUISITIONS AND DIVESTITURES

Acquisitions During the Nine Months Ended September 28, 2019

Prevacid^®24HR

On September 4, 2019, we entered into a definitive agreement to acquire the branded OTC rights of Prevacid^®from GlaxoSmithKline. The transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions. Total cash consideration will be subject to adjustment for brand performance prior to the closing and will range from $61.5 million to $65.0 million. The acquisition of Prevacid^® will expand our OTC gastrointestinal product portfolio, and we expect to allocate almost all of the purchase price to a brand name intangible asset. Operating results attributable to the product will be included in our CSCA segment.

Generic Product Acquisition

On July 2, 2019, we purchased the Abbreviated New Drug Application ("ANDA") for a generic gel product for $49.0 million in cash, which we capitalized as a developed product technology intangible asset. We launched the product during the third quarter of 2019 and began amortizing it over a 20-year useful life. Operating results attributable to the product will be included within our RX segment.

Ranir Global Holdings, LLC

On July 1, 2019, we acquired 100% of the outstanding equity interest in Ranir Global Holdings, LLC ("Ranir"), a privately-held company, for total base consideration of $750.0 million in a debt-free, cash-free transaction. We funded the transaction with cash on hand and borrowings under the 2018 Revolver (as defined in Note 10).

Ranir is headquartered in Grand Rapids, Michigan and is a leading global supplier of private label and branded oral self-care products. This transaction advances our transformation to a consumer-focused, self-care company while enhancing our position as a global leader in consumer self-care solutions. Ranir's U.S. operations are reported in our CSCA segment and its non-U.S. operations are reported in our CSCI segment.

During the three and nine months ended September 28, 2019, we incurred $12.5 million and $14.7 million of general transaction costs (legal, banking and other professional fees), respectively. The amounts were recorded in Administration expenses and were not allocated to an operating segment.

The acquisition of Ranir was accounted for as a business combination and has been reported in our Condensed Consolidated Statement of Operations as of the acquisition date. From July 1, 2019 through September 28, 2019, Ranir generated Net sales of $77.0 million and had no Net income (loss), which is inclusive of a non-recurring charge of $5.6 million related to inventory costs stepped up to acquisition date fair value.

We are in the process of gathering significant relevant information needed to complete the valuation for the assets acquired and liabilities assumed. As a result, the initial accounting for the acquisition is incomplete. The provisional acquisition amounts recognized for assets acquired and liabilities assumed will be finalized as soon as possible but no later than one year from the acquisition date. The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.

The following table summarizes the consideration paid for Ranir and the provisional amounts of the assets acquired and liabilities assumed (in millions):



	September 28, 2019
Cash consideration - net of cash acquired	$	749.5

Estimated fair value of assets acquired and liabilities assumed:
Property, plant and equipment, net	$	41.3
Goodwill	327.4
Definite-lived intangibles	326.4
In-process research and development	16.3
Other assets	2.8
Net working capital	67.9
Deferred income taxes	(32.6		)

The goodwill of $327.4 million arising from the acquisition consists largely of the anticipated growth from new product sales, sales to new customers, the assembled workforce, and the synergies expected from combining the operations of Perrigo and Ranir. Preliminarily, goodwill of $269.8 million and $57.6 million was allocated to our CSCA and CSCI segments, respectively. We are currently evaluating the tax deductibility of the provisional goodwill. We expect some portion to be deductible for income tax purposes. The estimated fair value attributed to definite-lived intangibles is being amortized on a straight-line basis over a weighted average remaining useful life of 21 years.

Pro Forma Impact of Ranir Acquisition

The following table presents unaudited pro forma information as if the Ranir acquisition had occurred on January 1, 2018 and had been combined with the results reported in our Condensed Consolidated Statements of Operations for all periods presented (in millions):



	Three Months Ended					Nine Months Ended
(Unaudited)	September 28, 2019		September 29, 2018			September 28, 2019		September 29, 2018
Net sales	$	1,191.1	$	1,200.2		$	3,652.7	$	3,749.1
Net income (loss)	$	105.3	$	(67.6	)	$	177.6	$	12.4

The unaudited pro forma information is presented for information purposes only and is not indicative of the results that would have been achieved if the acquisition had taken place at such time. The unaudited pro forma information presented above includes adjustments primarily for amortization charges for acquired intangible assets,

depreciation adjustments for property, plant and equipment that have been revalued, adjustments for certain acquisition-related charges, and related tax effects.

Generic Product Acquisition

On May 17, 2019, we purchased the ANDA for a generic product used to relieve pain for $15.7 million in cash, which we capitalized as a developed product technology intangible asset. We launched the product during the third quarter of 2019 and began amortizing it over a 20-year useful life. Operating results attributable to the product are included within our RX segment.

Budesonide Nasal Spray and Triamcinolone Nasal Spray

On April 1, 2019, we purchased the ANDAs and other records and registrations of Budesonide Nasal Spray, a generic equivalent of Rhinocort Allergy^®, and Triamcinolone Nasal Spray, a generic equivalent of Nasacort Allergy^®, from Barr Laboratories, Inc. ("Barr"), a subsidiary of Teva Pharmaceuticals, for a total of $14.0 million in cash. We previously developed and marketed the products in collaboration with Barr under a development, marketing and commercialization agreement that originated in August 2003. Under this prior agreement, we paid Barr a percentage of net income from products sold by Perrigo in the U.S. By purchasing the assets from Barr and terminating the original development, marketing and commercialization agreement, we are now entitled to 100% of the income from sales of the product. Operating results attributable to these products are included within our CSCA segment. The intangible assets acquired are classified as developed product technology with a 10-year useful life.

Acquisitions During the Nine Months Ended September 29, 2018

Generic Product Acquisition

On August 24, 2018, we purchased the ANDA for a generic topical cream for $30.4 million in cash, which we capitalized as a developed product technology intangible asset. We launched the product during 2018 and started amortizing it over a 20-year useful life. Operating results are included within our RX segment. Subsequently, during the three months ended June 29, 2019, we identified impairment indicators related to changes in pricing and competition in the market, which lowered the projected cash flows that we expect to generate from the asset. We determined the asset was impaired (refer to Note 4 and Note 6).

Nasonex-branded products

On May 29, 2018, we entered into a license agreement with Merck Sharp & Dohme Corp. ("Merck"), which allows us to develop and commercialize an OTC version of Nasonex-branded products containing the compound, mometasone furoate monohydrate. The acquisition was accounted for as an asset acquisition based on our assessment that substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset to be used for R&D. In accordance with Accounting Standards Codification Topic 730 Research and Development, the non-refundable upfront license fee of $50.0 million was recorded in R&D expense in our CSCA segment because the intangible research and development asset acquired has no alternative use. The agreement requires us to make contingent payments if we obtain regulatory approval and achieve certain sales milestones. We will also be obligated to make royalty payments on potential future sales. The contingent consideration will be included in the measurement of the cost of the asset when the contingency is resolved and the consideration is paid or becomes payable. Consideration paid after U.S. Food and Drug Administration approval will be capitalized and amortized to cost of goods sold over the economic life of each product.

Divestitures During the Nine Months Ended September 28, 2019

Animal health business

On July 8, 2019, we completed the sale of our animal health business to PetIQ for base consideration of $185.0 million, which, resulted in a gain of $72.4 million recorded in our CSCA segment in Other (income) expense, net on the Condensed Consolidated Statements of Operations. The final purchase price and gain is subject to customary post-closing adjustments for changes to working capital compared to the target working capital on the closing date and is expected to be finalized in the fourth quarter of 2019.