Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2015

Business Combinations and Dispositions [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

All of the Company’s acquisitions have been accounted for under Accounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the Company’s consolidated financial statements from their respective dates of acquisition.

The Company incurred $0.9 million of acquisition-related transaction costs in the three months ended September 30, 2015, resulting in a total of $2.1 million of acquisition-related transaction costs year to date. These costs were recorded in selling, general and administrative expense and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed. During the three and nine months ended September 30, 2015, the Company recorded within cost of sales $2.7 million and $3.4 million, respectively, of fair value inventory charges associated with the completed acquisitions.

2015 Acquisitions

On May 29, 2015, the Company acquired the stock of Novotema, SpA (“Novotema”), a leader in the design, manufacture and sale of specialty sealing solutions for use in the building products, gas control, transportation, industrial and water markets. The business was acquired to complement and create synergies with our existing sealing group. Located in Villongo, Italy, Novotema has annual revenues of approximately $33 million and will operate in our Health & Science Technologies segment. Novotema was acquired for cash consideration of $61.1 million (€56 million). The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $33.9 million and $20.0 million, respectively. The $33.9 million of goodwill is not deductible for tax purposes.

On June 10, 2015, the Company acquired the stock of Alfa Valvole, S.r.l (“Alfa”), a leader in the design, manufacture and sale of specialty valve products for use in the chemical, petro-chemical, energy and sanitary markets. The business was acquired to expand our valve capabilities. Located in Casorezzo, Italy, Alfa has annual revenues of approximately $33 million and will operate in our Fluid & Metering Technologies segment. Alfa was acquired for cash consideration of $112.6 million (€99.8 million). The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $68.0 million and $32.1 million, respectively. The $68.0 million of goodwill is not deductible for tax purposes.

On July 1, 2015, the Company acquired the membership interests of CiDRA Precision Services, LLC (“CPS”), a leader in the design, manufacture and sale of microfluidic components serving the life science, health and industrial markets. The business was acquired to provide a critical building block to our emerging microfluidic and nanofludics capabilities. Located in Wallingford, Connecticut, CPS has annual revenues of approximately $9 million and will operate within our Health & Sciences Technologies segment. CPS was acquired for an aggregate purchase price of $24.2 million, consisting of $19.5 million in cash and contingent consideration valued at $4.7 million as of the opening balance sheet date. The contingent consideration is based on the achievement of financial objectives during the 12-month period following the close. Based on potential outcomes, the undiscounted amount of all the future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $5.5 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $9.8 million and $12.3 million, respectively. The $9.8 million of goodwill is deductible for tax purposes.

The Company made an initial allocation of the purchase price for the Novotema, Alfa, and CPS acquisitions as of the date of acquisition based on its understanding of the fair value of the acquired assets and assumed liabilities. As the Company obtains additional information about these assets and liabilities, including tangible and intangible asset appraisals, and learns more about the newly acquired businesses, we will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate the valuation of inventory and accounts receivable associated with the Alfa acquisition and is in the process of finalizing purchase price allocations for the Novotema, Alfa, and CPS acquisitions. The Company will make appropriate adjustments to the purchase price allocations prior to the completion of the measurement period, as required.

The allocation of the acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values, is as follows:

	Novotema			Alfa			CPS			Total
Current assets, net of cash acquired	$	11,445		$	26,181		$	1,494		$	39,120
Property, plant and equipment	11,844			8,395			1,042			21,281
Goodwill	33,934			67,970			9,826			111,730
Intangible assets	20,011			32,058			12,290			64,359
Other noncurrent assets	1,226			470			140			1,836
Total assets acquired	78,460			135,074			24,792			238,326
Current liabilities	(7,493		)	(9,080		)	(613		)	(17,186		)
Deferred tax liability	(7,579		)	(11,828		)	—			(19,407		)
Other noncurrent liabilities	(2,290		)	(1,575		)	—			(3,865		)
Net assets acquired	$	61,098		$	112,591		$	24,179		$	197,868

Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisitions reflect the strategic fit, revenue and earnings growth potential of these businesses.

The acquired intangible assets and weighted average amortization periods are as follows:

	Total		Weighted Average Life
Trade names	$	9,246	15
Customer relationships	44,402		12
Unpatented technology	10,711		8
Acquired intangible assets	$	64,359

2014 Acquisitions

On April 28, 2014, the Company acquired the stock of Aegis Flow Technologies (“Aegis”), a leader in the design, manufacture and sale of specialty chemical processing valves for use in the chemical, petro-chemical, chlor-alkali, pharmaceutical, semiconductor and pulp/paper industries. Located in Geismar, Louisiana, Aegis operates in our Fluid & Metering Technologies segment. Aegis was acquired for cash consideration of $25.0 million. The entire purchase price was funded with borrowings under the Company’s revolving credit facility. Goodwill and intangible assets recognized as part of this transaction were $7.7 million and $8.8 million, respectively. The $7.7 million of goodwill is deductible for tax purposes.

2015 Dispositions

The Company periodically reviews its operations for businesses which may no longer be aligned with its strategic objectives and focus on core business and customers. On July 31, 2015, the Company entered into a definitive agreement to sell its Ismatec product line to Cole-Palmer Instruments Company for $27.7 million in cash, resulting in a pre-tax gain on the sale of $18.1 million. The Company recorded $4.8 million of income tax expense associated with this transaction during the three months ended September 30, 2015. The results of Ismatec were reported within the Health & Science Technologies segment through the date of sale.