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Acquisitions
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Acquisitions Acquisitions
Ranpak Business Combination—On June 3, 2019, the Company consummated the acquisition of all outstanding and issued equity interests of Rack Holdings, the Ranpak Business Combination, pursuant to the Stock Purchase Agreement for consideration of $794.9 million and €140.0 million ($160.8 million) in cash, (A) $341.5 million and €140.0 million of which was used by the Seller to repay outstanding indebtedness and unpaid transaction expenses as contemplated by the Stock Purchase Agreement and (B) the remainder of which was paid to Seller. The purchase price paid at Closing was estimated and subject to customary post-Closing adjustments which included an adjustment of $0.7 million for net working capital and as additional consideration.

The Ranpak Business Combination is accounted for under ASC 805. Pursuant to ASC 805, the Company has been determined to be the accounting acquirer. Refer to Note 1, "Nature of Operations," for more information. Rack Holdings constitutes a business with inputs, processes, and outputs. Accordingly, the acquisition of Rack Holdings constitutes the acquisition of a business for purposes of ASC 805 and due to the change in control of Rack Holdings was accounted for using the acquisition method. The Company recorded the fair value of assets acquired and liabilities assumed from Rack Holdings.
 
The allocation of the consideration to the assets acquired and liabilities assumed is based on various estimates. As of December 31, 2019, the Company completed its evaluation of net working capital as part of the purchase price paid at Closing and paid additional consideration of $0.7 million. The Company continues to evaluate the fair value of the acquired intangible assets and equipment. As such, to the extent of these estimates, the purchase price allocation is preliminary and subject to change within the respective measurement period which will not extend beyond one year from the acquisition date. Any adjustments will be recognized in the reporting period in which the adjustment amounts are determined.
The following represents the preliminary purchase price allocation for the Ranpak Business Combination:
 
Amount
Total Consideration
$
955.7

 
 
Cash and cash equivalents
10.1

Accounts receivable
28.2

Inventories
16.1

Property, plant and equipment
119.5

Other assets
4.8

Intangible assets
473.7

Total identifiable assets acquired
652.4

Accounts payable
8.6

Accrued expenses
7.4

Other liabilities
5.0

Deferred tax liabilities
122.9

Net identifiable liabilities acquired
143.9

Goodwill
$
447.2













Intangible assets and property, plant and equipment balance comprise the following:
 
Preliminary
Fair Value
 
Remaining
Useful Lives
 
Patented/Unpatented Technology
$
164.1

 
10
 
Customer/Distributor Relationships
198.6

 
15
 
In-Process Research & Development
5.0

 
10
(1) 
Trade Names/Trademarks
106.0

 
Indefinite
 
Total Preliminary Fair Value
$
473.7

 
 
 
(1) Until In-Process Research & Development projects become viable, these assets have an indefinite life and are subject to impairment
 
 
 
 
 
 
Machinery and Equipment
$
17.7

 
5
 
Converting machines
90.4

 
3 - 7
 
Buildings and Improvements
7.4

 
15
 
Land
4.1

 
N/A
 
Total Preliminary Fair Value
$
119.5

 
 
 

The preliminary fair values for the trade names/trademarks, patented/unpatented technology, and in-process R&D were determined using the Relief-from-Royalty Method, which is a combination of an Income Approach and Market Approach. The preliminary fair value for customer/distributor relationships was determined using the Multi-Period Excess Earnings Method, which is an Income-based Approach.
The preliminary fair value for land was determined using Sales Comparison and Cost Approaches, depending on location. The preliminary fair value for machinery and equipment, and buildings and improvements were determined using a combination of the Cost Approach and Market Approach, considering physical deterioration when determining current reproduction costs.
The preliminary estimates of remaining useful lives for the intangible assets and property, plant, and equipment were determined by assessing the period of economic benefit of the asset.

Goodwill represents the excess of the total purchase consideration over the fair value of the underlying net assets, largely arising from the assembled workforce, new customers and the replacement of customer and technology attrition. Goodwill is not amortized for tax purposes.

Transaction costs incurred in the Ranpak Business Combination totaled $48.0 million. Of this amount, $12.6 million was classified as debt issuance costs, including $1.7 million presented as assets and $10.9 million presented as a reduction to debt within the condensed consolidated balance sheets. Transaction costs expensed in the Successor Period from June 3, 2019 through December 31, 2019 amounted to $0.3 million, with an additional $7.4 million expensed in the Predecessor Period from January 1, 2019 through June 2, 2019 within income from operations in the condensed consolidated statement of operations.
 
Amount
Deferred financing costs
$
12.6

Transaction costs (including $11.3 million of IPO costs)
25.6

Payment of accrued transaction costs
9.8

Total
$
48.0

 
 
Debt issuance costs:
 
Presented as reduction to debt
$
10.9

Presented as asset
1.7

Total debt issuance costs
$
12.6


The following unaudited information represents the supplemental pro forma results of the Company’s consolidated statement of operations as if the Ranpak Business Combination occurred on January 1, 2018, for the years ended and December 31, 2019 and 2018, after giving effect to certain adjustments, including depreciation and amortization of the assets acquired and liabilities assumed based on their estimated fair values and changes in interest expense resulting from changes in debt (in millions):
 
 
December 31,
 
 
2019
2018
Net Sales
 
$
273.6

$
266.1

 
 
 
 
Net (loss) income
 
$
(9.7
)
$
(3.9
)


These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a combined company during the periods presented and are not necessarily indicative of consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments. Acquisition costs and other non-recurring charges incurred are included in the earliest period presented.
Neopack Acquisition—On February 28, 2017, pursuant to the Share Purchase Agreement (“e3NEO Purchase Agreement”) the Predecessor acquired all of the capital stock of Neopack Solutions S.A.S. dba e3NEO.
The e3NEO Purchase Agreement contained a contingent consideration arrangement that required the Company to pay e3NEO a “Next Generation Machine Payment”, which was computed by the Company based on certain criteria established in the e3NEO Purchase Agreement. The criteria included, but were not limited to, the design and development by e3NEO of a prototype of the “Next Generation Machine” as defined in the e3NEO Purchase Agreement. The maximum amount payable, $1.1 million, was recorded as contingent consideration, all of which was paid in 2018.
Additionally, the e3NEO Purchase Agreement contains an earn-out provision whereby the seller may be entitled to receive an earn-out payment in an amount up to the greater of (i) $2.6 million (the “Minimum Earn-Out Amount”), and (ii) the trailing twelve (12) month earnings before income taxes, depreciation and amortization of the business calculated as of December 31, 2020 multiplied by forty-eight percent (48%). In order to be eligible to receive the Minimum Earn-Out Amount pursuant to the purchase agreement, e3NEO must have caused the business to receive purchase orders from customers and receive sign-off from customers upon completion of a successful factory acceptance test related to certain next generation machines on or before December 31, 2019 subject to reasonable approval of the Company. The conditions of the earn-out were not achieved and the Company has agreed to a settlement arrangement with the former majority owner of e3NEO, which arrangement is subject only to final administrative approval by French authorities.  The arrangement would provide, among other things, for a payment to the earn-out counterparties in the amount of approximately $1.6 million of which $1.4 million was accrued at December 31, 2019 with the remainder, $0.2 million, anticipated to be expensed during 2020. The arrangement would also provide the former majority owner of e3neo with certain additional amounts upon his severance from the company, including statutory severance, non-compete and consulting amounts under French law. These additional amounts will be expensed in 2020.