Acquisitions and Dispositions

6 Months Ended

Jun. 28, 2014

Acquisitions and Dispositions Disclosure

Acquisitions and Dispositions [Text Block]

Note 2. Acquisitions and Dispositions

The company’s acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.

Acquisitions have been accounted for using the purchase method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.

2014

On February 3, 2014, the company completed the acquisition of Life Technologies Corporation within the Life Sciences Solutions segment for a total purchase price of $15.30 billion, net of cash acquired, including the assumption of $2.28 billion of debt. The company issued debt and common stock in late 2013 and early 2014 to partially fund the acquisition (Notes 9 and 11). Life Technologies provides innovative products and services to customers conducting scientific research and genetic analysis, as well as those in applied markets, such as forensics and food safety testing. The acquisition of Life Technologies extends customer reach and broadens the company’s offerings in biosciences; genetic, medical and applied sciences; and bioproduction. Life Technologies’ revenues totaled $3.87billion in 2013. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $7.12 billion was allocated to goodwill, substantially none of which is tax deductible.

In addition, in 2014, the company acquired an animal health diagnostics company within the Life Sciences Solutions segment for $34 million, net of cash acquired.

		The components of the purchase price and net assets acquired for 2014 acquisitions are as follows:
(In millions)			Life Technologies		Other		Total
Purchase Price
	Cash paid		$	13,487.3	$	41.7	$	13,529.0
	Debt assumed			2,279.7		—		2,279.7
	Purchase price payable			—		4.0		4.0
	Cash acquired			(463.0)		(11.5)		(474.5)
			$	15,304.0	$	34.2	$	15,338.2
Net Assets Acquired
	Current assets		$	1,768.1	$	18.4	$	1,786.5
	Property, plant and equipment			752.3		1.1		753.4
	Definite-lived intangible assets:
		Customer relationships		5,864.0		5.5		5,869.5
		Product technology		2,624.6		5.5		2,630.1
		Tradenames and other		240.6		—		240.6
	Indefinite-lived intangible assets:
		Tradenames		448.2		—		448.2
		In-process research and development		58.4		—		58.4
	Goodwill			7,123.5		12.5		7,136.0
	Other assets			251.8		0.1		251.9
	Liabilities assumed			(3,827.5)		(8.9)		(3,836.4)
			$	15,304.0	$	34.2	$	15,338.2

The weighted-average amortization periods for intangible assets acquired in 2014 are 16 years for customer relationships, 11 years for product technology and 9 years for definite-lived tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2014 is 14 years.

The net assets acquired have been recorded based on estimates of fair value. The company is not aware of any incomplete aspects of the purchase price allocation for Life Technologies except for the ongoing evaluation of the value attributable to various tradenames as of the acquisition date as well as their designation as indefinite-lived or definite-lived. The company expects the evaluation and any resulting changes to the purchase price allocation to be completed in the second half of 2014.

Unaudited Pro Forma Information

The company acquired Life Technologies in February 2014. Revenues of Life Technologies after the date of acquisition are included in the accompanying statement of income and totaled approximately $0.96billion and $1.62 billion in the three and six months ended June 28,2014, respectively. Immediately upon the closing of the acquisition, the company began integrating Life Technologies and as such the legacy and acquired businesses are now sharing various selling, general and administrative functions. As a result, computing a separate measure of Life Technologies’ stand-alone profitability for periods after the acquisition date is not practical.

Had the acquisition of Life Technologiesbeen completed as of the beginning of 2013, the company’s pro forma results for2014 and 2013 would have been as follows:

		Three Months Ended			Six Months Ended
		June 29,		June 28,			June 29,
(In millions except per share amounts)		2013			2014		2013
Revenues		$	4,153.6		$	8,501.5	$	8,268.6
Income from Continuing Operations		$	319.8		$	1,114.9	$	326.2
Net Income		$	319.6		$	1,114.9	$	321.4
Earnings per Share from Continuing Operations:
	Basic	$	0.81		$	2.80	$	0.83
	Diluted	$	0.80		$	2.77	$	0.82
Earnings per Share:
	Basic	$	0.81		$	2.80	$	0.82
	Diluted	$	0.80		$	2.77	$	0.81

Pro forma results include non-recurring pro forma adjustments that were directly attributable to the business combination, as follows:

• Pre tax charge to selling, general and administrative expenses of $208.2million in the six months ended June 29,2013, for acquisition-related transaction costs incurred by the company and Life Technologies;
• Pre tax charge to cost of revenues of $55.4 million and $301.4million in the three and six months ended June 29,2013, for the sale of Life Technologies inventories revalued at the date of acquisition;
• Pre tax charge of $91.7million in the six months ended June 29,2013, for monetizing equity awards held by Life Technologies’ employees at the date of acquisition;
• Pre tax charge of $37.6million in the six months ended June 29,2013, to conform the accounting policies of Life Technologies with the company's accounting policies; and
• Pre tax reduction of revenues of $5.2 million, $4.7million and $16.8million in the three months endedJune 29,2013 and the six months ended June 28,2014 and June 29,2013, respectively, for revaluing Life Technologies’ deferred revenue obligations to fair value.

These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future.

The company’s results would not have been materially different from its pro forma results had the company’s other 2014 acquisition occurred at the beginning of 2013.

Dispositions

On July 17, 2014, the company announced that it had entered an agreement to sell its Cole-Parmer specialty channel business, part of the Laboratory Products and Services segment, for $480 million in cash. The transaction is expected to close in the third quarter of 2014, subject to customary closing conditions and applicable regulatory approvals. Revenues and operating income of the business to be sold were approximately $232 million and $43 million, respectively, for the year ended December 31, 2013 and $119 million and $23 million, respectively, in the first half of 2014.

The assets and liabilities of the Cole-Parmer business were as follows at June 28, 2014:

	June 28,
(In millions)		2014
Current Assets		$	39.5
Long-term Assets			400.3
Current Liabilities			15.5
Long-term Liabilities			84.1

On March 21, 2014, the company sold its sera and media, gene modulation and magnetic beads businesses to GE Healthcare for $1.05 billion, net of cash divested, or $0.8 billion of after-tax proceeds. The businesses fell principally in the Life Sciences Solutions segment. Divestiture of these businesses was a condition to obtaining antitrust approval for the Life Technologies acquisition. Revenues and operating income of the businesses sold were approximately $250 million and $64 million, respectively, for the year ended December 31, 2013 and $61 million and $12 million, respectively, in 2014 through the date of sale. The sale of these businesses resulted in a pre-tax gain of approximately $761 million, included in restructuring and other costs (income), net.

The assets and liabilities of the businesses sold in March 2014 were as follows at December 31, 2013:

	December 31,
(In millions)		2013
Current Assets		$	74.3
Long-term Assets			229.3
Current Liabilities			6.4
Long-term Liabilities			22.0