Acquisitions and Divestitures

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Acquisitions and Divestitures

Acquisitions and Divestitures

(a) Acquisitions

Yardney

On November 24, 2014. we completed the acquisition Yardney. Based in East Greenwich, Rhode Island, Yardney is a designer, developer and manufacturer of high-performance lithium-ion and silver-zinc cells and batteries for niche applications in the defense and aerospace markets. We funded the initial $24.6 million acquisition price through existing cash balances at the time of the acquisition. The balance sheet at the acquisition date was based on preliminary estimated purchase accounting. In the first quarter ending March 31, 2015, we agreed on the closing working capital with the seller which resulted in a post-closing purchase price reduction of $1.5 million. The updated purchase price of $23.1 million, after the working capital settlement and other minor purchase accounting adjustments, resulted in a preliminary allocation of $12.7 million of net assets, including $6.5 million of identifiable intangibles. The remaining $10.4 million was recorded as goodwill, which is not expected to be deductible for tax purposes.

VAC

Our Magnetic Technologies segment consists of VAC Holding GmbH ("VAC"), which we acquired in 2011. The total purchase price of $812.2 million included cash consideration of $686.2 million, withheld consideration of $86.3 million, and the issuance of Company shares valued at $39.7 million. The withheld consideration relates to potential indemnification claims made by OM Group and accepted by the seller, if any, within two years of the closing date of the acquisition with certain exceptions related to tax matters. In August 2013, we remitted a payment of $23.0 million to the seller of VAC and entered into arbitration with the seller to determine the outcome of the remaining withheld consideration. In December 2014, we withdrew one claim related to certain potential tax obligations and remitted a payment of $16.2 million to the seller of VAC and charged certain tax assessments related to pre-acquisition tax years of $1.6 million against the outstanding withholding liability. In March 2015, the arbitration decision was issued addressing the remaining declaratory actions we had undertaken in support of our indemnification claims and we remitted a payment of $52.5 million to the seller of VAC. The payment consisted of the remaining non-tax related withholding liability of $41.8 million and $10.7 million in charges associated with the arbitration conclusion, which included interest charges and legal fee reimbursement. The remainder of the purchase price of VAC payable to the seller of $4.1 million is tax related and will be resolved when all open tax examinations are completed by the tax authorities in the various jurisdictions, which we expect to occur in 2015. Due to the length of time over which these withholding liability payments are being made, these payments are classified as financing activities within the Unaudited Condensed Consolidated Statement of Cash Flows.

(b) Divestitures

Advanced Materials

On March 29, 2013, we completed the divestiture of our cobalt-based business. The transaction comprised the sale of the downstream portion of the business (including our cobalt refinery assets in Kokkola, Finland), and the transfer of our equity interests in the DRC-based joint venture, known as GTL, to the joint venture partners, subject to a security interest in our favor with respect to the joint venture's performance related to certain supply arrangements.

The sale agreement for the downstream portion of the business also provides for potential future additional cash consideration of up to $110.0 million based on the business achieving certain revenue targets over a period of three years. Using our projected trends of cobalt prices and volumes, it is not probable that the business will meet the revenue targets, and no value was assigned to the potential future cash consideration while calculating the loss on the divestiture at December 31, 2014 or March 31, 2015.

Following the sale, to assist in the transition of the downstream business, we entered into two agreements with the buyer pursuant to which: (1) We acted as intermediary in a supply agreement between GTL and the buyer, in back-to-back arrangements for a period of two years. We met the cobalt feed supply target under that agreement in October 2014. The supply agreement terminated as of March 31, 2015 and we expect all related activity under the performance of the agreement to be completed in the second quarter of 2015. (2) We also served as the U.S. distributor for refined cobalt products in primarily back-to-back arrangements until December 31, 2013.