Acquisitions

9 Months Ended

Jun. 30, 2019

Acquisitions [Abstract]

Acquisitions

ACQUISITIONS

Fiscal Year 2019 Business Combinations

Exchange of Equity Affiliate Investments

As of 30 September 2018, we held 50% ownership interests in High-Tech Gases (Beijing) Co., Ltd. ("High-Tech Gases") and WuXi Hi-Tech Gas Co., Ltd. ("WuXi"), both of which were joint ventures with another industrial gas company in China. We accounted for these arrangements as equity method investments in our Industrial Gases – Asia segment through 30 April 2019.

On 1 May 2019, we acquired our partner's 50% interest in WuXi in exchange for our 50% interest in High-Tech Gases. The purpose of the exchange was to simplify the current structure of the two entities and to allow each party to serve its customers more efficiently in their respective geographies. Subsequent to the acquisition date, we own 100% of WuXi and no longer have an equity interest in High-Tech Gases.

The exchange resulted in a net gain of $29.1, of which $15.0 resulted from the revaluation of our previously held equity interest in WuXi to its acquisition date fair value and $14.1 resulted from the disposition of our interest in High-Tech Gases. The net gain has been reflected as "Gain on exchange of equity affiliate investments" on our consolidated income statements and was excluded from segment operating income for the three and nine months ended 30 June 2019. There were no tax impacts on the exchange.

We revalued our previously held 50% equity interest in WuXi based on an estimated acquisition date fair value of $27.0. We calculated this fair value using a discounted cash flow analysis under the income approach, which required estimates and assumptions regarding projected revenue growth, customer attrition rates, profit margin, and discount rate.

The acquisition of the remaining interest in WuXi was accounted for as a business combination. The results of this business have been consolidated within our Industrial Gases – Asia segment as of the acquisition date. Upon acquisition, we recognized plant and equipment of $28.0, intangible assets of $27.6, and goodwill of $4.2. The intangible assets were primarily customer relationships, having a weighted-average useful life of approximately 10 years. The goodwill recognized on the transaction, none of which is deductible for tax purposes, was recorded in the Industrial Gases – Asia segment and is attributable to expected growth synergies. The acquisition did not materially impact our consolidated income statements for the periods presented.

ACP Europe SA Acquisition

On 1 March 2019, we completed the acquisition of ACP Europe SA ("ACP"), the largest independent carbon dioxide business in Continental Europe, for an aggregate purchase price, net of cash acquired, of $106.3. We expect this acquisition to enable us to better serve existing merchant customers and pursue new industrial gas growth opportunities across additional European geographies. The results of this business are consolidated within our Industrial Gases – EMEA segment and did not materially impact our consolidated income statements for the periods presented.

The acquisition of ACP was accounted for as a business combination and resulted in the recognition of plant and equipment of $74.6 and goodwill of $38.0, partially offset by net liabilities acquired. The goodwill recognized on the transaction, none of which is deductible for tax purposes, was recorded in the Industrial Gases – EMEA segment and is attributable to expected growth and cost synergies.

The acquired assets and liabilities resulting from our 2019 business combinations were recorded at their estimated fair values, which were calculated based on a preliminary purchase price allocation prepared by management. We may record adjustments to these assets and liabilities during the preliminary purchase price allocation period, which could be up to one year from the acquisition date.

Fiscal Year 2018 Asset Acquisition

On 26 April 2018 ("the acquisition date"), we completed the formation of Air Products Lu An (Changzhi) Co., Ltd. ("the JV"), a 60%-owned joint venture with Lu'An Clean Energy Company ("Lu'An"). The JV receives coal, steam, and power from Lu’An and supplies syngas to Lu’An under a long-term onsite contract. The results of the JV are consolidated within the Industrial Gases – Asia segment.

Air Products contributed four large air separation units to the JV with a carrying value of approximately $300, and the JV acquired gasification and syngas clean-up assets from Lu’An for 7.9 billion RMB (approximately $1.2 billion). As a result, the carrying value of the plant and equipment of the JV was approximately $1.5 billion at the acquisition date.

We accounted for the acquisition of the gasification and syngas clean-up assets as an asset acquisition. In connection with closing the acquisition, we paid net cash of approximately 1.5 billion RMB ($235) and issued equity of 1.4 billion RMB ($227) to Lu'An for their noncontrolling interest in the JV.

In addition, Lu'An made a loan of 2.6 billion RMB to the JV with regularly scheduled principal and interest payments at a fixed interest rate of 5.5%, and we established a liability of 2.3 billion RMB for cash payments expected to be made to or on behalf of Lu'An in 2019. Long-term debt payable to Lu'An of $321.6 and $384.3 as of 30 June 2019 and 30 September 2018, respectively, is presented on the consolidated balance sheets as "Long-term debt – related party." As of 30 June 2019, $62.9 of the loan is reflected within "Current portion of long-term debt." The expected remaining cash payments are presented within "Payables and accrued liabilities" and were $80.8 and $330.0 as of 30 June 2019 and 30 September 2018, respectively.

The issuance of equity to Lu'An for their noncontrolling interest, the long-term debt, and the liability for the remaining cash payments were noncash transactions that have been excluded from the consolidated statement of cash flows for the nine months ended 30 June 2018. 

Fiscal Year 2018 Business Combinations

During the first nine months of fiscal year 2018, we completed eight acquisitions that were accounted for as business combinations. These acquisitions had an aggregate purchase price, net of cash acquired, of $355.4. The largest of the acquisitions was completed during the first quarter of fiscal year 2018 and primarily consisted of three air separation units serving onsite and merchant customers in China, which strengthened our position in the region. The results of this business are consolidated within our Industrial Gases – Asia segment.