
Note 2.	Acquisitions

The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net 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.

2017

On August 28, 2017, the company acquired, within the Laboratory Products and Services segment, substantially all of the issued and outstanding shares of Patheon N.V., a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or $7.36 billion, including the assumption of net debt. The company financed the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt and equity (Notes 8 and 10).

Patheon provides comprehensive, integrated and highly customizable solutions as well as the expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. The acquisition provided entry into the contract development and manufacturing organization market and added a complementary service to the company's existing portfolio. Patheon's revenues totaled $1.87 billion for the year ended October 31, 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $3.17 billion was allocated to goodwill, none of which is tax deductible.

On March 2, 2017, the company acquired, within the Analytical Instruments segment, Core Informatics, a North America-based provider of cloud-based platforms supporting scientific data management, for a total purchase price of $94 million, net of cash acquired. The acquisition enhanced the company's existing informatics solutions. Revenues of Core Informatics were approximately $10 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $63 million was allocated to goodwill, $50 million of which is tax deductible.

On February 14, 2017, the company acquired, within the Life Sciences Solutions segment, Finesse Solutions, Inc., a North America-based developer of scalable control automation systems and software for bioproduction, for a total purchase price of $221 million, net of cash acquired. The acquisition expanded the company's bioproduction offerings. Revenues of Finesse Solutions were approximately $50 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $135 million was allocated to goodwill, none of which is tax deductible.

In addition, in 2017 the company acquired, within the Specialty Diagnostics segment, a North America-based molecular diagnostics company offering qPCR tests to the transplant community, for an aggregate purchase price of $43 million.

The components of the purchase price and net assets acquired for 2017 acquisitions are as follows:



(In millions)	Patheon			Core Informatics			Finesse Solutions			Other			Total

Purchase Price
Cash paid	$	6,861.1		$	94.6		$	223.1		$	45.6		$	7,224.4
Debt assumed	488.1			—			—			0.2			488.3
Fair value of contingent consideration	—			9.1			—			3.1			12.2
Fair value of equity awards exchanged	6.1			—			—			—			6.1
Purchase price payable	49.9			—			—			—			49.9
Cash acquired	(47.5		)	(10.1		)	(2.1		)	(6.0		)	(65.7		)

	$	7,357.7		$	93.6		$	221.0		$	42.9		$	7,715.2

Net Assets Acquired
Current assets	$	1,060.3		$	2.0		$	18.0		$	4.3		$	1,084.6
Property, plant and equipment	1,306.9			0.2			1.6			0.7			1,309.4
Definite-lived intangible assets:
Customer relationships	3,607.0			6.3			67.7			15.1			3,696.1
Product technology	—			29.1			32.0			5.0			66.1
Tradenames and other	109.6			2.7			2.2			—			114.5
Indefinite-lived intangible assets:
In-process research and development	—			—			1.6			—			1.6
Goodwill	3,168.9			62.5			134.7			27.2			3,393.3
Other assets	58.8			—			—			—			58.8
Deferred tax liabilities	(1,029.7		)	(3.7		)	(22.3		)	(7.7		)	(1,063.4		)
Other liabilities assumed	(924.1		)	(5.5		)	(14.5		)	(1.7		)	(945.8		)

	$	7,357.7		$	93.6		$	221.0		$	42.9		$	7,715.2

The weighted-average amortization periods for definite-lived intangible assets acquired in 2017 are 17 years for customer relationships, 10 years for product technology and 4 years for tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2017 is 16 years.

The preliminary allocation of the purchase price for Patheon was based on estimates of the fair value of the net assets acquired and is subject to adjustment upon finalization of the valuation of the acquired intangible assets, property, plant and equipment and the related deferred taxes. Measurements of these items inherently require significant estimates and assumptions.

Unaudited Pro Forma Information

The following unaudited pro forma information provides the effect of the company's acquisition of Patheon as if the acquisition had occurred on January 1, 2016, and the effects of the company's 2016 acquisitions of FEI Company and Affymetrix, Inc. as if the acquisitions had occurred on January 1, 2015:



	Three Months Ended				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
(In millions except per share amounts)	2017		2016		2017		2016

Revenues	$	5,392.9	$	5,113.1	$	16,075.9	$	15,379.4

Net Income	$	522.0	$	446.6	$	1,671.1	$	1,133.4

The historical consolidated financial information of the company, Patheon, FEI, and Affymetrix has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisitions and related financing arrangements, are expected to have a continuing impact on the company, and are factually supportable.

To reflect the acquisition of Patheon as if it had occurred on January 1, 2016, the unaudited pro forma results include adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset and the interest expense from debt financing obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the company's historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisition of Patheon and related financing occurred on January 1, 2016, nor are they meant to be indicative of any anticipated combined results of operations that the company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the completion of the transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the transaction.

Pro forma net income for the nine months ended September 30, 2017, excludes certain items associated with the Patheon acquisition that were included in the determination of net income for that period. These items have been included in the determination of pro forma net income for the nine months ended October 1, 2016 and are as follows: $42 million of direct transaction costs, $33 million of accounting policy conformity adjustments, $18 million of initial restructuring costs, $18 million reduction of revenues for revaluing the deferred revenue obligations to fair value, and $15 million of expense related to the fair value adjustment to acquisition-date inventories.

The company’s results would not have been materially different from its pro forma results had the company’s other 2016 or 2017 acquisitions occurred at the beginning of 2015 or 2016, respectively.

Revenues of Patheon in 2017, subsequent to the date of acquisition, were $190 million. Operating losses for the same period totaled $53 million, primarily due to acquisition-related charges and restructuring charges related to synergy planning.

Revenues and operating income of the FEI acquisition in the first nine months of 2017 were $928 million and $71 million, respectively. Operating results include significant acquisition-related and restructuring costs related to synergy planning.