17.

Subsequent Events

Acquisition of Spectrum, Inc.

On August 1, 2017, the Company completed the acquisition of Spectrum pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 22, 2017, by and among the Company and Spectrum (such acquisition, the “Spectrum Acquisition”).

Spectrum is a diversified filtration company with a differentiated portfolio of hollow fiber cartridges, bench-top to commercial scale filtration and perfusion systems and a broad portfolio of disposable and single-use solutions. Spectrum’s products are primarily used for the filtration, isolation, purification and concentration of monoclonal antibodies, vaccines, recombinant proteins, diagnostic products and cell therapies where the company offers both standard and customized solutions to its bioprocessing customers.

Spectrum’s filtration products include its KrosFlo^® line of hollow-fiber cartridges, tangential flow filtration (TFF) systems and single-use flow path consumables, as well as its Spectra/Por^® portfolio of laboratory dialysis products and its Pro-Connex^® single-use hollow fiber Module-Bag-Tubing (MBT) sets. Outside of filtration, the company sells its Spectra/Chrom^® liquid chromatography products for research applications. These bioprocessing products account for the majority of Spectrum revenues. Spectrum also offers a line of operating room products.

The Spectrum Acquisition will be accounted for as a purchase of a business under ASC 805, Business Combinations. The Spectrum Acquisition was funded through payment of approximately $124.2 million in cash and 6,153,995 shares of the Company’s common stock totaling $247.6 million for a total purchase price of $371.8 million.

Consideration Transferred

The Company accounted for the Spectrum Acquisition as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of Spectrum were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $371.8 million.

The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. An updated purchase price valuation and allocation will be completed in the third quarter of 2017. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that Repligen believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred follows (in thousands):


Cash consideration	$	124,686
Equity consideration		247,575
Less: working capital adjustment		(449	)

Net assets acquired	$	371,812

Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. The Company has incurred $2,395,000 in transaction costs related to the Spectrum Acquisition for the three- and six-month periods ended June 30, 2017. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquired and liabilities based on the preliminary valuation. The components and allocation of the purchase price consists of the following amounts (in thousands):


Cash and cash equivalents	$	7,071
Marketable securities		990
Accounts receivable		5,950
Inventory		11,349
Prepaid expenses and other current assets		891
Fixed assets		5,613
Customer relationships		73,530
Developed technology		37,630
Trademark and tradename		2,140
Non-competition agreements		770
Other assets		988
Goodwill		276,241
Accounts payable		(1,287	)
Accrued liabilities		(2,248	)
Deferred tax liabilities, net		(42,629	)
Unrecognized tax benefit		(576	)
Estimated closing indebtedness		(2,635	)
Estimated transaction costs		(1,976	)

Fair value of net assets acquired	$	371,812

The preliminary purchase price allocation is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined upon completion of a final valuation analysis, and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis. The final allocation may include, but not be limited to, changes in the fair value of property, plant and equipment and changes in allocations to intangible assets and goodwill, as well as changes in the values of other assets and liabilities.

Due to the proximity of the closing date of the Spectrum Acquisition to the filing date of these financial statements, financial information from Spectrum, as well as other financial information related to the Spectrum Acquisition, could not be reasonably obtained in order to prepare pro forma financial statement disclosures as of and for the three- and six-month periods ended June 30, 2017.

Public Offering of Common Stock

On July 3, 2017, the Company completed a public offering in which 2,807,017 shares of its common stock were sold to the public at a price of $42.75 per share. The underwriters were granted an option, which they exercised in full, to purchase an additional 421,052 shares of the Company’s common stock. The total proceeds from this offering, net of underwriting discounts, commissions and other offering expenses, totaled approximately $129.4 million.