Business Divestiture

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

BUSINESS DIVESTITURE

Divestiture of Microbial Control

During the third quarter of 2021, the Company announced it had entered into an agreement to sell its Microbial Control business unit, which was a part of the Health & Biosciences segment. The Company acquired the Microbial Control business unit as part of the Merger with N&B.

The Company completed the divestiture of the Microbial Control business unit on July 1, 2022 and received cash proceeds of approximately $1.254 billion, of which approximately $36 million was attributable to future services to be provided under certain transition service agreements as described below. Certain transaction costs related to the divestiture of approximately $11 million, which was contingent upon the consummation of the divestiture, were determined to be direct costs to sell and, as such, were adjusted against the fair value of sales consideration. In addition, approximately $15 million of cash proceeds were held in escrow and will be released to the Company upon satisfaction of certain conditions. The sale consideration is subject to certain post-closing adjustments, which primarily relate to cash, indebtedness and working capital balances.

The Company entered into transition services agreements with the buyer for providing certain general accounting, information technology and other services up to 19 months following the date of the sale for minimal consideration. The fair value of these transition service agreements was determined to be approximately $36 million, which was adjusted against the sale consideration and recognized as deferred transition services income.

For the three and nine months ended September 30, 2022, the transition services income under the transition services agreements was approximately $6 million and was recognized as a reduction to the costs incurred to provide services under the transition service agreements, which was included in Selling and administrative expenses on the Consolidated Statements of (Loss) Income and Comprehensive Loss.

The following table summarizes the fair value of the sale consideration received in connection with the divestiture:


(DOLLARS IN MILLIONS)
Cash proceeds from the buyer	$	1,254
Amount held in escrow	15
Proceeds attributable to transition service agreements	(36)
Direct costs to sell	(11)
Fair Value of sale consideration	$	1,222

The net proceeds received from business divestiture presented under Cash flows from investing activities represent the cash portion of the sale consideration, which was determined as the fair value of sale consideration reduced by the amount held in escrow and the Cash transferred to the buyer on the closing balance sheet as part of the transaction. The following table summarizes the different components of net proceeds received from business divestiture presented under Cash flows from investing activities:


(DOLLARS IN MILLIONS)
Fair value of sale consideration	$	1,222
Amount held in escrow	(15)
Cash transferred to the buyer on the closing balance sheet	(49)
Net proceeds received from business divestiture	$	1,158

The carrying amount of net assets associated with the Microbial Control business unit was approximately $1.208 billion. The major classes of assets and liabilities sold consisted of the following:


(DOLLARS IN MILLIONS)	June 30, 2022
Assets
Current assets	$	263
Goodwill and other intangible assets, net	867
Equity method investment	74
Other assets	80
Total assets	$	1,284
Liabilities
Accounts payable	$	41
Other liabilities	35
Total liabilities	$	76

As a result of the divestiture, the Company recognized a pre-tax gain of approximately $14 million, subject to certain post-closing adjustments, presented in other income, net on the Consolidated Statements of (Loss) Income and Comprehensive Loss for the three and nine months ended September 30, 2022. The Company also recognized the income tax effects associated with the divestiture of approximately $110 million based on preliminary estimates as of September 30, 2022.