Note 2 - Business Combinations

6 Months Ended

Nov. 30, 2015

Notes to Financial Statements

Business Combination Disclosure [Text Block]

2. BUSINESS COMBINATIONS

Business combinations completed in fiscal 201

6

:

Acquisition of reference lab

– On August 3, 2015, the Company completed the asset purchase of a U.S. reference lab for a total cash purchase price of $0.8 million. This acquisition will enable Immucor to deliver current Immucor products as a service to customers as well as commercialize newly developed products. The fair values of the acquired assets were $0.3 million for equipment, $0.2 million for identifiable intangible assets and $0.3 million for goodwill.

Business combinations completed in fiscal 2015:

Acquisition of Sentilus

– On October 1, 2014, the Company completed the acquisition of Sentilus, Inc. (“Sentilus”). Sentilus was a privately-held company focused on developing a novel, inkjet-printed antibody microarray-based technology, Femtoarrays

TM

. Among other uses, Sentilus has been developing Femtoarrays

TM

and the underlying technology for use in a variety of in vitro diagnostics areas, including transfusion diagnostics, and could potentially serve as a next generation technology platform for our transfusion diagnostics business. The total cash purchase price of the Sentilus business was $6.0 million which was paid in the second quarter of fiscal year 2015. The purchase agreement includes two contingent consideration arrangements, one for achieving certain regulatory milestones with a potential earn-out for $4.0 million in cash over the next three years, and the other in the form of performance payments based on a percentage of net future sales of the to-be-developed products over approximately the next twenty years. Management estimated that the fair value of the contingent consideration arrangements, as of the acquisition date, was approximately $6.3 million, which is included in Other long-term liabilities on the Company’s consolidated balance sheet. This was determined by applying a form of the income approach, based upon the probability-weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the financial performance targets. The key assumptions were the earn-out period payment probabilities, projected revenues, discount rate and the timing of payments. The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payments. These assumptions are considered to be level 3 inputs by ASC Topic 820,

Fair Value Measurement

(“ASC Topic 820”), which are not observable in the market. Including the contingent consideration, the aggregate estimated fair value of the consideration paid was approximately $12.3 million. The other identifiable intangible assets include in-process research and development (“IPR&D”) and a non-competition agreement, which was valued at $18.8 million in the aggregate. Goodwill was valued at $0.6 million and the long-term deferred tax liability was valued at $7.2 million. The goodwill arising from this acquisition is not deductible for tax purposes.

Acquisition of LIFECODES distribution business

– The Company completed the acquisition of the LIFECODES distribution business in India effective August 1, 2014. This acquisition enables Immucor to streamline the distribution of its LIFECODES products in that region.

The Company acquired the assets of the India distribution business for a total cash purchase price of $0.4 million, of which a total of $0.2 million was paid in both the first and second quarters of fiscal 2015. The purchase price also included a potential earn-out of up to $0.2 million if certain financial targets are met during the two year period ending July 2016.

The operating results of these acquired businesses have been included in the Company’s consolidated results of operations since their dates of acquisition.