Acquisitions

12 Months Ended

Dec. 31, 2019

Acquisitions

Acquisitions

Note 2 - Acquisitions

On October 28, 2019, Seaboard’s CT&M segment increased its ownership percentage from 50% to 100% to obtain control of ContiLatin del Peru S.A., an importer and trader of grains in Peru (“CLDP”). Seaboard accounted for this transaction as a business combination achieved in stages. Total consideration for the purchase price included $7 million of cash paid, net of $2 million cash acquired, Seaboard’s previously held equity interest in CLDP remeasured at its acquisition-date fair value of $9 million and pre-existing affiliate trade receivables fair valued at the acquisition date of $13 million.

Seaboard is currently completing the fair value assessment of the acquired assets and liabilities and any adjustments identified in the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively. The following table summarizes the preliminary purchase price allocation resulting from this consolidation:

(Millions of dollars)
Receivables	$	33
Inventories		55
Other current assets		7
Property, plant and equipment		12
Goodwill		1
Total fair value of assets acquired		108
Lines of credit		(65)
Current maturities of long-term debt		(2)
Other current liabilities		(6)
Long-term debt, less current maturities		(6)
Total fair value of liabilities assumed		(79)
Net fair value of assets acquired	$	29

Goodwill represents CLDP’s market presence and its experienced workforce. For the year ended December 31, 2019, net sales of $87 million and net loss of $2 million were recognized in Seaboard’s consolidated financial statements from the date of acquisition. Pro forma results of operations are not presented as the effects are not material to Seaboard’s results of operations. Seaboard incurred no acquisition costs.

On January 5, 2018, Seaboard’s CT&M segment acquired substantially all of the outstanding common shares of Borisniak Corp., Les Grands Moulins d’Abidjan, Les Grands Moulins de Dakar, Eurafrique, and Societe Mediterraneenne de Transport, collectively operating as Groupe Mimran (“Mimran”). Mimran operates three flour mills and an associated grain trading business located in Senegal, Ivory Coast and Monaco. This acquisition increased Seaboard’s flour and feed milling capacity and annual grain trading volume.

The total purchase price for this acquisition based on the acquisition date fair values and using the exchange rate in effect at the time of acquisition, was $324 million consisting of:

(Millions of dollars)
Cash payment, net of $64 million of cash acquired	$	264
Euro-denominated note payable due 2021, 3.25% interest		46
Contingent consideration		14
Total fair value of consideration at acquisition date	$	324

See Note 8 for further description of the note payable. The fair value of the contingent consideration, classified in other non-current liabilities in the consolidated balance sheet, is dependent on the probability of Mimran achieving certain financial performance targets using earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a metric. The contingent consideration ranges between zero and $48 million payable between five and eight years following the closing, at the discretion of the sellers. The note payable and the contingent consideration are noncash transactions that were excluded from the consolidated statement of cash flows for the year ended December 31, 2018.

The following table summarizes the purchase price allocation resulting from this acquisition:

(Millions of dollars)
Current assets	$	83
Property, plant and equipment		91
Intangible assets		78
Goodwill		148
Other long-term assets		4
Total fair value of assets acquired		404
Current liabilities		(38)
Other long-term liabilities		(38)
Total fair value of liabilities assumed		(76)
Less: Noncontrolling interest		(4)
Net fair value of assets acquired	$	324

The intangible assets include $28 million allocated to trade names, amortizable over 9 years, and $50 million allocated to customer relationships, amortizable over 9 years. Goodwill represents Mimran’s market presence and its experienced workforce. The intangible assets and goodwill are not deductible for income tax purposes.

Certain Mimran entities acquired are accounted for on a three-month lag and use local currency as their functional currency. Translation gains and losses are recorded as components of other comprehensive income (loss). For the year ended December 31, 2018, net sales of $247 million and net earnings of $17 million were recognized in Seaboard’s consolidated financial statements from the date of acquisition. Acquisition costs incurred primarily in 2017, of $2 million were expensed in selling, general and administrative expenses.

The following unaudited pro forma information presents the combined consolidated financial results for Seaboard as if the acquisition had been completed at January 1, 2017:

	Year ended
(Unaudited)	December 31,
(Millions of dollars except per share amounts)	2018		2017
Net sales	$	6,643	$	6,095
Net earnings (loss)	$	(13)	$	272
Earnings (loss) per common share	$	(10.90)	$	233.45