ACQUISITIONS AND DISPOSITIONS

12 Months Ended

Dec. 31, 2020

ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS AND DISPOSITIONS

4. ACQUISITIONS AND DISPOSITIONS

Acquisitions

The Company makes business acquisitions that align with its strategic business objectives. The assets and liabilities of acquired businesses are recorded in the Consolidated Balance Sheet at fair value as of their acquisition date. The purchase price allocation is based on estimates of the fair value of assets acquired, liabilities assumed and consideration paid. Purchase consideration is reduced by the amount of cash or cash equivalents acquired. Acquisitions during 2020, 2019 and 2018 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

2020 Activity

CID Lines Acquisition

During 2020, the Company acquired CID Lines for total consideration of $506.9 million in cash. CID Lines had annualized pre-acquisition sales of approximately $110 million and is a leading global provider of livestock biosecurity and hygiene solutions based in Belgium.

The CID Lines acquisition has been accounted for as a business combination with the assets acquired and liabilities assumed recognized at fair value as of the acquisition date. Fair value measurement of certain carry over tax attributes, deferred income taxes, income tax uncertainties, and goodwill are not yet finalized and are subject to changes as the information necessary to complete the analyses is obtained and analyzed. Purchase accounting for this transaction is not yet complete pending finalization of certain estimated values. The amounts recorded reflect the Company’s best estimates as of December 31, 2020 and are subject to change.

The Company incurred certain transaction and integration costs associated with the acquisition that were expensed and are reflected in the Consolidated Statement of Income. Further information related to the Company’s special (gains) and charges is included in Note 3.

The following table summarizes the preliminary value of CID Lines assets acquired and liabilities assumed as of the acquisition date.

(millions)	2020
Tangible assets		$54.1
Identifiable intangible assets
Customer relationships		147.5
Trademarks		58.6
Acquired technologies and product registrations		47.7
Total assets acquired		307.9
Goodwill		275.7
Total liabilities		98.1
Net consideration transferred to sellers		$485.5

Tangible assets acquired primarily consist of accounts receivable of $30.3 million, property, plant and equipment of $7.3 million and inventory of $16.3 million. Liabilities assumed primarily consist of deferred tax liabilities of $64.8 million and current liabilities of $33.3 million. Identified intangible assets primarily consist of customer relationships, trademarks, and acquired technology and product registrations and are being amortized over average lives of 14, 14, and 16 years, respectively.

Goodwill of $275.7 million arising from the acquisition consists largely of the synergies and economies of scale expected through adding complementary geographies and innovative products to our Food and Beverage businesses. CID Lines became part of the Global Industrial reportable segment. None of the goodwill recognized from the acquisition is expected to be deductible for income tax purposes.

Other Acquisitions

Other than CID Lines, the Company did not close on any other business acquisitions during 2020.

2019 Activity

During 2019, the Company acquired Bioquell, a life sciences business which sells bio-decontamination products and services to the Life Sciences and Healthcare industries. This business became part of the Global Industrial reportable segment. During 2018, the Company deposited $179.3 million (£140.5 million) in an escrow account that was released upon closing of the transaction in February 2019. As shown within Note 5, this was recorded as restricted cash within other assets on the Consolidated Balance Sheet as of December 31, 2018.

The Company also acquired Lobster Ink, a leading provider of end-to-end online customer training solutions. This acquired business became part of the Global Institutional & Specialty reportable segment. The purchase price included an earn-out based on the achievement of a revenue threshold in any of the three fiscal years following the acquisition. The acquisition date fair value of the earn-out was reflected in the overall purchase consideration exchanged for the acquisition and recorded as contingent consideration. The earn-out has not yet been paid or settled and the contingent consideration liability is recorded within other liabilities as of December 31, 2020.

The Company also acquired Chemstar Corporation, a leading provider of cleaning and sanitizing products for the retail industry with a focus on cleaning chemicals and food safety. This acquired business became part of the Global Institutional & Specialty reportable segment.

The Company also acquired Gallay Medical & Scientific which sells, installs, and services medical equipment and associated chemistry primarily for hospitals, healthcare facilities, and dental clinics. The acquired business became part of the Global Healthcare & Life Sciences reportable segment.

Pre-acquisition sales for the businesses acquired in 2019 were $134 million.

Purchase accounting for these acquisitions was finalized in 2020 resulting in insignificant purchase price adjustments being recorded.

2018 Activity

During 2018, the Company acquired a water business which provides a range of services to Nalco Water institutional customers. This acquired business became part of the Company’s Global Industrial reportable segment. In addition, the Company acquired an institutional business which provides a range of cleaning and disinfection products for the hospitality, leisure, residential care, housekeeping and janitorial sectors. These acquisitions have been accounted for using the acquisition method of accounting. In addition, there were insignificant purchase price adjustments related to prior year acquisitions.

Acquisitions

The components of the cash paid for other acquisitions, excluding the CID Lines acquisition (as further disclosed above), for 2020, 2019 and 2018, are shown in the following table.

(millions)	2020		2019		2018
Net tangible assets (liabilities) acquired and equity method investments		$-		($8.0)		$30.1
Identifiable intangible assets
Customer relationships		-		115.7		101.5
Trademarks		-		24.1		3.9
Non-compete agreements		-		-		2.6
Other technology		-		48.9		6.5
Total intangible assets		-		188.7		114.5
Goodwill		-		234.8		81.9
Total aggregate purchase price		-		415.5		226.5
Acquisition-related liabilities and contingent considerations		-		(24.1)		(1.5)
Net cash paid for acquisitions, including acquisition-related
liabilities and contingent considerations		$-		$391.4		$225.0

During 2020, the Company recorded purchase accounting adjustments associated with its 2019 acquisitions. As a result of these purchase accounting adjustments, the net intangible assets and goodwill recognized from these acquisitions increased by $0.9 million and $0.6 million, respectively. In conjunction with the finalization of its purchase accounting, the Company made $3.5 million of acquisition-related payments which primarily consisted of the release of holdback liabilities and payment of contingent consideration. The 2019 and 2018 acquisition-related liabilities primarily consist of holdback liabilities and contingent considerations.

The weighted average useful lives of identifiable intangible assets acquired were 14,12, and 13 years as of December 31, 2020, 2019 and 2018, respectively.

Dispositions

In the second quarter of 2020, the Company completed the sale of Holchem, a U.K. based supplier of hygiene and cleaning products and services for the food and beverage, foodservice and hospitality industries for total consideration of $106.6 million. Consideration consisted of $55.4 million of cash and the receipt of notes valued at $51.2 million from the acquirer. In the fourth quarter of 2020, all outstanding principal and interest on the notes was paid by the acquirer. After the recognition of transaction costs, the Company recognized an after-tax loss of $12.8 million, which was classified within special charges in the Consolidated Statement of Income. Annual sales of Holchem were approximately $55 million and were included in the Global Industrial reportable segment prior to disposition.

As discussed in Note 5, the ChampionX separation met the criteria to be reported as discontinued operations. No other dispositions were significant to the Company’s consolidated financial statements for 2020, 2019 or 2018.

Subsequent Event Activity

Subsequent to year end, the Company separately acquired European Institutional and Healthcare businesses. The aggregate purchase consideration paid for these two acquisitions was approximately $100 million. The acquisitions are not material to the Company’s consolidated financial statements individually or in the aggregate.