C. Acquisitions

Acquisition of Norit

On July 31, 2012, Cabot acquired all the issued and outstanding shares of Norit N.V. (“Norit”) for approximately $1.1 billion in cash. Norit develops, manufactures and sells activated carbon products and related delivery systems used in a range of applications, including air and water purification, food and beverages, pharmaceuticals and catalysts. The results of Norit’s operations are reported under the Purification Solutions reportable segment.

As of June 2013, the Company completed the valuation of its assets acquired and liabilities assumed. The allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of July 31, 2012. During the nine months ended June 30, 2013, the Company recorded certain measurement period adjustments which are presented in the table below. The measurement period adjustments and the related tax impact were immaterial to the Company’s consolidated financial statements. Accordingly, the effects have not been retrospectively applied. The following table presents the components and allocation of the purchase price, including the measurement period adjustments:


	At Acquisition Date (As reported at September 30, 2012)			Measurement Period Adjustments (nine months ended June 30, 2013)			At Acquisition Date (As adjusted and reported at June 30, 2013)
				(Dollars in millions)
Current assets	$	207		$	(4	)	$	203

Property, plant and equipment		385			(14	)		371

Other non-current assets		72			4			76

Intangible assets		325			(8	)		317

Goodwill		432			22			454

Current liabilities		(98	)		—			(98	)

Deferred non-current tax liabilities		(176	)		4			(172	)

Other non-current liabilities		(34	)		(4	)		(38	)

Total purchase price	$	1,113		$	—		$	1,113

As part of the purchase price allocation, the Company determined that the separately identifiable intangible assets were customer relationships, developed technology, and trademarks in the amounts of $110 million, $150 million, and $57 million, respectively. Customer relationships and developed technology are being amortized over a weighted average period of 18 years and 20 years, respectively. Trademarks are considered to have an indefinite life and will be tested for impairment annually or when events or changes in the business environment indicate that the carrying value of the intangible assets may exceed their fair value.

The determination of the fair value of intangible assets acquired required the use of significant judgment with regard to (i) assumptions used in the valuation model; and (ii) determination of the intangible assets’ useful lives. The Company estimated the fair value of identifiable acquisition-related intangible assets principally based on projections of cash flows that will arise from these assets. The projected cash flows were discounted to determine the fair value of the assets at the date of acquisition.

The fair value of the assets acquired includes trade receivables of $46 million. The Company did not acquire any other class of receivable when it acquired Norit.

The excess of the purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the expected growth and operating synergies that the Company expects to realize from this acquisition. Goodwill from the acquisition will not be deductible for tax purposes.

The following table provides pro forma net sales and earnings for the three and nine months ended June 30, 2012, as if Norit had been acquired on October 1, 2011. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on assets acquired from Norit resulting from recording the fair value of assets acquired, the impact of acquisition financing with the related tax effects, and certain reclassifications to conform with the current year’s presentation. The pro forma adjustments also include non-recurring adjustments in pro forma earnings of $19 million in the nine months ended June 30, 2012, related to the step-up of inventory values at the acquisition date. The pro forma results do not include any synergies or other effects of the planned integration of Norit. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on October 1, 2011, nor are they indicative of the future operating results of the combined company.


	Three months ended June 30, 2012 (unaudited)		Nine months ended June 30, 2012 (unaudited)
	(Dollars in millions except per share amounts)		(Dollars in millions except per share amounts)
Net sales	$	933	$	2,707
Income from continuing operations		65		157

Acquisition of Nhumo

In June 2013, the Company entered into a stock purchase agreement with Grupo Kuo S.A.B. de C.V. (“KUO”) to purchase the remaining 60 percent common stock equity of its Mexican carbon black manufacturing joint venture, NHUMO, S.A.de C.V (“NHUMO”), for $105 million. At the closing of the transaction, the Company will pay KUO $80 million in cash and $25 million of redeemable preferred stock will be issued by NHUMO to KUO. The preferred stock will accumulate dividends at 6% annually, which will be payable annually, and will be redeemable at the option of KUO or the Company on the fifth anniversary of the closing for $25 million. The acquisition is expected to close during calendar year 2013, pending regulatory approvals.