Business Combinations and Asset Acquisitions

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Business Combination Disclosure [Text Block]

Acquisition of Orscheln Farm and Home, LLC and Related Divestitures

On October 12, 2022, the Company completed its acquisition of Orscheln, which expands the Company's footprint in the U.S. Midwest. Pursuant to the agreement governing the acquisition, the Company acquired 100% of the equity interest in Orscheln, inclusive of 166 Orscheln stores, the Orscheln corporate headquarters, and the Orscheln distribution center. The total purchase consideration was $393.4 million, exclusive of cash acquired. The acquisition was financed with cash-on-hand and Revolving Credit Facility borrowings under the 2022 Senior Credit Facility (as defined below).

In order to obtain regulatory approval for the Orscheln acquisition, the Federal Trade Commission required the Company to divest of 85 stores, which were sold to two buyers, Bomgaars Supply, Inc. (“Bomgaars”) (73 stores) and Buchheit Enterprises, Inc. (12 stores), on October 12, 2022, concurrently with the closing of the acquisition. Net proceeds from the store divestitures were $69.4 million. In addition, the Company sold the Orscheln corporate headquarters and distribution center to Bomgaars for $10.0 million in the third quarter of fiscal 2023.

The purchase consideration and fair value of Orscheln’s net assets acquired on October 12, 2022 are shown below. The assets and liabilities of the 85 divested stores, along with the Orscheln corporate headquarters and the Orscheln distribution center, are shown as held for sale in the fair value of assets acquired and liabilities assumed.

(in thousands)	Amounts Recognized as of Acquisition Date		Measurement Period Adjustments		Amounts Recognized as of September 30, 2023
Fair value of assets acquired
Cash and cash equivalents	$	6,935	$	—	$	6,935
Accounts receivable	277		—		277
Inventories	168,663		(22,871)		145,792
Prepaid expenses and other current assets	7,222		304		7,526
Property and equipment	13,328		1,804		15,132
Lease right of use assets	82,755		—		82,755
Deferred income taxes	18,481		8,852		27,333
Assets held for sale	173,554		—		173,554
Other assets	160		(14)		146
Less: liabilities assumed
Accounts payable	80,323		344		80,667
Accrued liabilities	20,291		6,108		26,399
Short-term lease liabilities	5,986		—		5,986
Long-term lease liabilities	70,626		—		70,626
Liabilities held for sale	94,190		—		94,190
Goodwill	197,742		14,067		211,810
Total fair value of considerations transferred	$	397,700	$	(4,310)	$	393,390

Note: Amounts may not sum to totals due to rounding.

The $211.8 million goodwill shown above represents the expected synergies from combining the operations of Orscheln with Tractor Supply stores and the expanded footprint that Orscheln brings in the U.S. Midwest. Approximately $130.3 million of this goodwill is deductible for income tax purposes.