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ACQUISITIONS

6 Months Ended

Jun. 30, 2020

NOTE 17 – ACQUISITIONS

Business Combinations

On April 1, 2020, we completed our acquisition (the “Fusion Acquisition”) of 100% of the equity interests of Fusion Packaging, Inc. (“Fusion”) for a purchase price of approximately $163.8 million (net of $1.0 million of cash acquired), which was funded by a draw on our revolving credit facility and cash on hand. Fusion, based in Dallas, TX, is a global leader in the design, engineering and distribution of luxury packaging for the beauty industry. As part of the Fusion Acquisition, we are also obligated to pay to the selling equity holders of Fusion certain contingent consideration based on 2022 cumulative financial performance metrics as defined in the purchase agreement. Based on a projection as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $19.1 million utilizing a Black-Scholes valuation model. As of June 30, 2020, $5.7 million was held in restricted cash pending the finalization of a working capital adjustment and indemnity escrow. Subsequent to the end of the quarter, $2.0 million of working capital escrow was released from restriction. Fusion contributed net sales of $13.8 million and pretax loss of $3.3 million for the quarter ended June 30, 2020 which have been included in the Condensed Consolidated Financial Statements within our Beauty + Home segment. Included in pretax loss is $2.7 million of fair value adjustment amortization for inventory sold during 2020. We are in the process of finalizing our purchase accounting.

On October 31, 2019, we completed our acquisition (the “Noble Acquisition”) of 100% of the equity interests of Noble International Holdings, Inc., Genia Medical, Inc. and JBCB Holdings, LLC (collectively referred to as “Noble”). Noble, based in Orlando, FL, is a leading provider in developing patient-centric advanced drug delivery system training devices including autoinjector, prefilled syringe, onbody and respiratory devices for the world’s leading biopharmaceutical companies and original equipment manufacturers. The purchase price was approximately $62.3 million (net of $1.6 million of cash acquired) and was funded by cash on hand. As part of the Noble Acquisition, we are also obligated to pay to the selling equity holders of Noble certain contingent consideration based on 2024 cumulative financial performance metrics defined in the purchase agreement. Based on projection as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $2.9 million utilizing the Black-Scholes valuation model. As of December 31, 2019, $5 million was held in restricted cash pending the finalization of a working capital adjustment and indemnity escrow. During the first quarter of 2020, $1.0 million related to the working capital escrow was released from restriction, resulting in an additional $463 thousand payment due to the seller and a corresponding increase to our purchase price and associated goodwill balance. The results of Noble’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On June 5, 2019, we completed our acquisition (the “Nanopharm Acquisition”) of all of the outstanding capital stock of Nanopharm Ltd. (“Nanopharm”). Nanopharm, located in Newport, UK, is a science-driven, leading provider of orally inhaled and nasal drug product design and development services. The purchase price was approximately $38.1 million (net of $1.8 million of cash acquired) and was funded by cash on hand. The results of Nanopharm’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

On May 31, 2019, we completed our acquisition (the “Gateway Acquisition”) of all of the outstanding equity interests of Gateway Analytical LLC (“Gateway”). Gateway, located in Gibsonia, PA, provides industry-leading particulate detection and predictive analytical services to customers developing injectable medicines. The purchase price was approximately $7.0 million and was funded by cash on hand. As part of the Gateway Acquisition, we are also obligated to pay to the selling equity holder of Gateway certain contingent consideration based on 2020 and 2022 performance targets defined in the purchase agreement. Based on projections as of the acquisition date, we estimated the aggregate fair value for this contingent consideration arrangement to be $3.0 million. During the quarter ended June 30, 2020, $1.5 million of the contingent consideration accrual was paid as a result of the business meeting their first performance target. Additionally, the remaining $1.5 million accrual was reclassified from long-term to short-term liabilities as the payment is expected to be made within a year. The results of Gateway’s operations have been included in the Condensed Consolidated Financial Statements within our Pharma segment since the date of acquisition.

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date at estimated fair value.


	2020		2019
Assets
Cash and equivalents	$	1,010	$	3,427
Accounts receivable		4,380		3,504
Inventories		386		—
Prepaid and other		1,090		2,478
Property, plant and equipment		2,885		4,267
Goodwill		99,644		59,143
Intangible assets		79,900		52,980
Operating lease right-of-use assets		4,744		—
Other miscellaneous assets		65		430
Liabilities
Accounts payable, accrued and other liabilities		5,641		5,388
Deferred income taxes		—		2,592
Operating lease liabilities		4,207		—
Deferred and other non-current liabilities		322		1,598
Net assets acquired	$	183,934	$	116,651

The following table is a summary of the fair value estimates of the acquired identifiable intangible assets and weighted-average useful lives as of the acquisition date:


	2020			2019
	Weighted-Average	Estimated		Weighted-Average	Estimated
	Useful Life	Fair Value		Useful Life	Fair Value
	(in years)	of Asset		(in years)	of Asset
Acquired technology	4	$	4,600	8	$	9,160
Customer relationships	13		62,300	11		39,379
Trademarks and trade names	4		10,300	4		2,457
License agreements and other	0.25		2,700	1		1,984
Total		$	79,900		$	52,980

Goodwill in the amount of $99.6 million was recorded related to the Fusion Acquisition which is included in the Beauty + Home segment and $59.1 million was recorded related to the 2019 acquisitions, all of which are included in the Pharma segment. Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill largely consists of unique relationships, brand equity and proprietary technology that has been established creating niches such as turnkey solutions for the beauty market related to the Fusion Acquisition, analytical services for drug developers related to the Nanopharm Acquisition and Gateway Acquisition and patient onboarding related to the Noble Acquisition, as well as the abilities of the acquired companies to maintain their competitive advantage from a technical viewpoint. Goodwill will not be amortized, but will be tested for impairment at least annually. For the Fusion Acquisition, goodwill of $82.3 million will be deductible for tax purposes. For the 2019 acquisitions, goodwill of $31.1 million will be deductible for tax purposes.

The unaudited pro forma results presented below include the effects of the Fusion Acquisition as if it had occurred as of January 1, 2019. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as intangible asset amortization, fair value adjustments for inventory and financing costs related to the change in our debt structure. The pro forma results do not include any synergies or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been completed on the date indicated.


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

Net Sales	$	699,305	$	762,148	$	1,428,821	$	1,525,826
Net Income Attributable to AptarGroup Inc.		45,989		75,811		96,350		139,003
Net Income per common share — basic		0.72		1.19		1.50		2.20
Net Income per common share — diluted		0.69		1.14		1.45		2.11

Asset Acquisition

On August 2, 2019, we completed our asset acquisition (the “Bapco Acquisition”) of the remaining 80% ownership interest in the capital stock of Bapco Closures Holdings Limited (“Bapco”), for $3.8 million (net of $2.9 million of cash acquired). The 20% ownership investment previously held in Bapco is now included within the intangible assets acquired. Bapco, located in Leeds, UK, provides innovative closures sealing technology that provides package integrity and tamper evidence. The results of Bapco’s operations have been included in the Condensed Consolidated Financial Statements within our Food + Beverage segment since the date of acquisition.