Subsequent Events

3 Months Ended

Apr. 02, 2022

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

New Senior Secured Credit Facilities

On April 20, 2022, pursuant to a new credit agreement, we entered into new senior secured credit facilities that consist of (i) a 1.0 billion five-year revolving credit facility (the “New Revolving Facility”), (ii) a $500 million five-year term loan A facility (the “New Term Loan A Facility”), and (iii) a $1.1 billion seven-year term loan B facility (the “New Term Loan B Facility” and, together with the New Term Loan A Facility, the “New Term Loan Facilities,” and the New Term Loan Facilities together with the New Revolving Facility, the “New Senior Secured Credit Facilities”). The New Senior Secured Credit Facilities are being incurred by our indirect wholly-owned subsidiary, Perrigo Investments, LLC, and will be guaranteed, along with any hedging or cash management obligations entered into with a lender, by us and certain of our wholly-owned subsidiaries. Perrigo Investments and the subsidiaries of the Company that guarantee the New Senior Secured Credit Facilities will also provide guarantees of the Company’s and Perrigo Finance’s other existing notes.

We used a portion of the proceeds from the New Term Loan Facilities, together with cash on hand, to finance the previously announced acquisition of HRA Pharma and to repay our outstanding term loan facility. We expect to redeem our 4.00% Senior Notes due 2023 and Perrigo Holding N.V.’s outstanding 5.1045% Guaranteed Senior Notes due 2023 on May 20, 2022, using a portion of the proceeds from the New Term Loan Facilities. We may borrow amounts from time to time under the New Revolving Facility, which replaces our existing revolving facility, for general corporate purposes.

HRA Pharma Acquisition

On April 29, 2022, we completed the previously announced acquisition of 100% of the outstanding equity interest in HRA Pharma for total consideration of €1.8 billion, or approximately $1.9 billion based on exchange rates at the time of close on an enterprise value basis and using a lockbox mechanism set forth in the Purchase Agreement. We funded the transaction with cash on hand and borrowings (as defined above). Operating results are expected to be reported within both our CSCA and CSCI segments.

During the three months ended April 2, 2022, we incurred $10.5 million of general transaction costs (legal, banking and other professional fees), of which $7.0 million was recorded in Administration expenses and were not allocated to an operating segment, and $3.5 million was recorded in Other income (expense), net relating to financing activities.

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 and the supplemental pro-forma information will be included in our Quarterly Report on Form 10-Q for the second quarter of 2022. We anticipate allocating a significant proportion of the purchase price to definite lived intangible assets related to the Compeed, Mederma, and Women's Health brands. We also expect to allocate a portion of the purchase price, net of assumed liabilities, to working capital, other developed products, intellectual property R&D, and goodwill. Other acquired assets or assumed liabilities may be identified during the measurement period.

Transaction Financing Hedge Activities

To reduce the foreign exchange risk related to the €1.8 billion purchase price of HRA Pharma, prior to acquisition, we purchased undesignated currency options with a notional amount of $1.1 billion in September 2021. At the time we were obligated to pay premiums of $25.9 million in September 2022, of which $20.9 million was recognized as a loss in Other (income) expense during the year ended December 31, 2021. An additional loss of $3.6 million was recognized on the currency options during the quarter ended April 2, 2022. Subsequent to April 2, 2022, we entered into new undesignated options to economically hedge the purchase price for HRA Pharma for a total notional amount of $2.0 billion. All premiums associated with the HRA Pharma related currency options were settled in April 2022 for $37.0 million, and we will recognize $12.5 million of loss in Other (income) expense during the three months ending July 2, 2022.

In connection with the New Senior Secured Credit Facilities, we entered into five variable-to-fixed interest rate swap agreements. Three of the interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the New Term Loan B Facility. The interest rate swaps cover an interest period ranging from June 1, 2022, through April 1, 2029, on notional balances that decline from $1.0 billion to $812.5 million over the term. The other two of the interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the New Term Loan A Facility. The interest rate swaps cover an interest period ranging from June 1, 2022, through April 1, 2027, on notional balances of $875 million. As designated cash flow hedges, the derivatives will be recorded at fair value with gains and losses recorded in other comprehensive income and recognized in interest expense as interest is paid on the Term Loan A and B Facilities.

In connection with the New Senior Secured Credit Facilities, and to reduce the Euro exposure of our net investment in European operations, we entered into three fixed-for-fixed cross-currency interest rate swaps designated as net investment hedges using the spot-to-spot method. Over the term, we receive Euro interest payments and make USD interest payments followed by an exchange of notional currencies at the expiration of the contract. The following are the terms and notional amounts outstanding:

•$300 million notional amount outstanding from April 20, 2022 through December 15, 2024;

•$700 million notional amount outstanding from April 29, 2022 through March 25, 2026; and

•$500 million notional amount outstanding from April 22, 2022 through June 15, 2030.

As a designated net investment hedge, gains and losses related to the Euro spot exchange rate will be deferred in cumulative translation adjustment and recognized in the income statement when the hedged Euro net investment is substantially liquidated. Gains and losses on excluded components (e.g. interest differentials) will be recorded in the income statement on a systematic and rational basis.