Acquisitions and Dispositions

12 Months Ended

Dec. 25, 2021

Business Combination and Asset Acquisition [Abstract]

2021 Acquisitions

Mueller Middle East

On December 7, 2021, the Company entered into an agreement providing for the purchase of an additional 15 percent equity interest in Mueller Middle East for a total of 55 percent, for approximately $20.0 million. The total purchase price consisted of $15.8 million in cash paid at closing (net of cash acquired), a gain recognized on the settlement of preexisting relationships of $2.6 million, a contingent consideration arrangement of $1.0 million, and the fair value of the Company’s existing investment in the joint venture of $0.7 million. Mueller Middle East, which manufactures copper tube, is headquartered in Bahrain. This business complements the Company’s existing copper tube businesses in the Piping Systems segment. Prior to entering into this agreement, the Company was the technical and marketing lead with a 40 percent ownership in a joint venture with Cayan Ventures and Bahrain Mumtalakat Holding Company and accounted for this investment under the equity method of accounting. The Company began consolidating this business for financial reporting purposes in December 2021. Mueller Middle East manufactures and sells copper coils to certain Mueller subsidiaries. Total sales to Mueller subsidiaries were approximately $48.2 million and $37.4 million for the period in 2021 prior to consolidation and 2020, respectively.

H&C Flex

On December 20, 2020, the Company entered into an asset purchase agreement with Hart & Cooley LLC. The transaction closed on January 29, 2021, whereby the Company purchased the Hart & Cooley flexible duct business, which included inventory, manufacturing equipment, and related assets for approximately $15.3 million. The total purchase price consisted of $14.0 million in cash paid at closing and a contingent consideration arrangement of $1.3 million, which was paid in Q3 2021. The Company treated this as a business combination. The acquired business, H&C Flex, is a manufacturer and distributor of insulated HVAC flexible duct systems. It is reported within and complements the Company’s existing businesses in the Climate segment.

2020 Acquisitions

Kessler

On August 3, 2020, the Company entered into an asset purchase agreement with Wieland-Kessler LLC, whereby the Company purchased the Kessler distribution business, which included inventory, manufacturing equipment, and related assets. The total purchase price was $57.2 million in cash paid at closing. The Company treated this as a business combination. The acquired business, Kessler Sales and Distribution, LLC (Kessler), is a distributor of residential and commercial plumbing products. It is reported within and complements the Company’s existing businesses in the Piping Systems segment. For the years ended December 25, 2021 and December 26, 2020, the Company’s total net sales included $207.9 million and $55.0 million, respectively, of revenue recognized by Kessler from the date of acquisition.

Shoals

On January 17, 2020, the Company entered into a stock purchase agreement pursuant to which the Company acquired all of the outstanding stock of Shoals Tubular, Inc. (Shoals) for approximately $15.3 million in cash at closing, net of working capital adjustments. Shoals is a manufacturer of brazed manifolds, headers, and distributor assemblies used primarily by manufacturers of residential heating and air conditioning units. The acquired business is reported within and complements the Company’s existing businesses in the Climate segment. This business was sold in Q3 2021.

Purchase Price Allocations

These acquisitions were accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The following table summarizes the allocation of the purchase price to acquire these businesses, which were financed by available cash balances, as well as the assets acquired and liabilities assumed at the respective acquisition dates. During the year, immaterial adjustments were made to the Kessler provisional purchase price allocation resulting in an increase in intangible assets of $1.5 million, a decrease in property, plant, and equipment of $1.4 million, and a decrease in goodwill of $0.1 million. The purchase price allocations for Mueller Middle East and H&C Flex are provisional as of December 25, 2021 and subject to change upon the completion of the final valuation of long-lived assets, the noncontrolling interest, and contingent consideration during the measurement period.


(In thousands)	Mueller Middle East		H&C Flex		Kessler			Shoals

Total consideration	$	20,017	$	15,279	$	57,233		$	15,321

Allocated to:
Accounts receivable	10,669		—		—			660
Inventories	4,733		4,511		25,106			1,809
Other current assets	1,747		—		—			26
Property, plant, and equipment	22,476		10,813		2,211			3,700
Operating lease right-of-use assets	936		—		10,526			—
Goodwill	12,098		—		11,600		(1)	1,870		(1)
Intangible assets	—		—		16,600			7,480

Total assets acquired	52,659		15,324		66,043			15,545

Accounts payable	4,600		—		—			217
Current portion of operating lease liabilities	—		—		1,692			—
Other current liabilities	11,489		45		—			7

Noncurrent operating lease liabilities	1,030		—		7,118			—
Other noncurrent liabilities	109		—		—			—
Total liabilities assumed	17,228		45		8,810			224

Noncontrolling interest	15,414		—		—			—

Net assets acquired	$	20,017	$	15,279	$	57,233		$	15,321

(1) Tax-deductible goodwill

The following details the total intangible assets identified in the allocation of the purchase price at the respective acquisition dates:


(In thousands)	Estimated Useful Life	Kessler		Shoals

Intangible asset type:
Customer relationships	20 years	$	12,640	$	4,290
Non-compete agreements	3-5 years	—		150
Patents and technology	10-15 years	—		2,620
Trade names, licenses, and other	5-10 years	3,960		420



Total intangible assets		$	16,600	$	7,480

2021 Dispositions

Copper Bar

On October 25, 2021, the Company sold its Copper Bar business for approximately $10.1 million. This business manufactured copper bar products used primarily by OEMs in the U.S. and was included in the Industrial Metals segment. The carrying value of the assets disposed totaled $3.6 million, consisting primarily of inventories and long-lived assets. As a result of the transaction, the Company recognized a pre-tax gain of $6.5 million on the sale of the business in the Consolidating Financial Statements.

Die-Mold

On September 2, 2021, the Company entered into a contribution agreement with a limited liability company in the retail distribution business, pursuant to which the Company exchanged the outstanding common stock of Die-Mold for a 17 percent equity interest in the limited liability company. Die-Mold manufactures PEX and other plumbing-related fittings and plastic injection tooling in Canada and sells these products in Canada and the U.S. and was included in the Piping Systems Segment. Die-Mold reported net sales of $10.9 million and operating income of $2.2 million for the year ended December 25, 2021 compared to net sales of $13.5 million and operating income of $2.3 million in the year ended December 26, 2020. As a result of the transaction, the Company recognized a gain of $4.7 million based on the excess of the fair value of the consideration received (the 17 percent equity interest) over the carrying value of Die-Mold. The Company utilized a combination of income and market comparable companies approaches using an EBITDA multiple to determine the fair value of the consideration received of $22.8 million, which is recognized within the Investments in unconsolidated affiliates line of the Consolidated Balance Sheet. The excess of the fair value of the deconsolidated subsidiary over its carrying value resulted in the gain.

Fabricated Tube Products and Shoals Tubular, Inc.

On July 28, 2021, the Company entered into a purchase agreement with J.W. Harris Co., Inc. and Lincoln Electric Holdings, Inc., pursuant to which the Company sold the assets of Fabricated Tube Products (FTP) and all of the outstanding stock of STI for approximately $75.7 million. These businesses manufacture and fabricate valves and assemblies, brazed manifolds, headers, and distributor assemblies used primarily by manufacturers of residential heating and air conditioning units in the U.S. and were included in the Climate segment. They reported combined net sales of $37.0 million and operating income of $5.5 million for the year ended December 25, 2021 compared to combined net sales of $51.5 million and operating income of $6.4 million in the year ended December 26, 2020. The carrying value of the assets disposed totaled $32.7 million, consisting primarily of accounts receivable, inventories, and long-lived assets. The carrying value of the liabilities disposed totaled $3.6 million, consisting primarily of accounts payable. As a result of the transaction, the Company recognized a pre-tax gain of $46.6 million on the sale of these businesses in the Consolidating Financial Statements.