Acquisitions

9 Months Ended

Oct. 02, 2021

Acquisitions and Dispositions [Text Block]

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, primarily due to expectations of the synergies that will be realized by combining the businesses and the benefits that will be gained from the assembled workforce. 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 acquisition method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition.

Pending Acquisition

On April 15, 2021, the company entered into a definitive agreement under which it will acquire PPD, Inc. for $47.50 per share for a total cash purchase price of $17.4 billion plus the assumption of approximately $3.5 billion of net debt. PPD provides a broad range of clinical research and specialized laboratory services to enable customers to accelerate innovation and increase drug development productivity. Upon close of the transaction, PPD will become part of the Laboratory Products and Services Segment. Shareholders holding in aggregate approximately 60% of the issued and outstanding shares of common stock of PPD on April 15, 2021, have approved the transaction by written consent. No further action by other PPD shareholders is required to approve the transaction. On July 16, 2021, the company and PPD each received a request for additional information and documentary materials (collectively, the “Second Request”) from the U.S. Federal Trade Commission (FTC), in connection with the FTC’s review of the proposed merger. The effect of the Second Request is to extend the waiting period imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), until the 30th day after substantial compliance by the company and PPD with the Second Request, unless the waiting period is terminated earlier by the FTC. As of October 22, 2021, both the company and PPD had certified substantial compliance with the Second Request. The transaction remains subject to the satisfaction of customary closing conditions, including termination of the HSR Act waiting period and receipt of applicable regulatory approvals outside the U.S. Subject to the satisfaction of the required closing conditions, we continue to expect the merger to be completed by the end of 2021.

2021

On January 15, 2021, the company acquired, within the Laboratory Products and Services segment, the Belgium-based European viral vector manufacturing business of Groupe Novasep SAS for $834 million in net cash consideration. The European viral vector manufacturing business provides manufacturing services for vaccines and therapies to biotechnology companies and large biopharma customers. The acquisition expands the segment’s capabilities for cell and gene vaccines and therapies. The goodwill recorded as a result of this business combination is not tax deductible.

On February 25, 2021, the company acquired, within the Life Sciences Solutions segment, Mesa Biotech, Inc., a U.S.-based molecular diagnostic company, for $409 million in net cash consideration and contingent consideration with an initial fair value of $65 million due upon the completion of certain milestones. Mesa Biotech has developed and commercialized a polymerase chain reaction (PCR) based rapid point-of-care testing platform available for detecting infectious diseases including COVID-19. The acquisition enables the company to accelerate the availability of reliable and accurate advanced molecular diagnostics at the point of care. The goodwill recorded as a result of this business combination is not tax deductible.

On September 30, 2021, the company assumed operating responsibility, within the Laboratory Products and Services segment, of a new state-of-the-art biologics manufacturing facility in Lengnau, Switzerland from CSL Limited to perform pharma services for CSL with capacity to serve other customers as well. The company expects to make fixed lease payments aggregating to $555 million (excluding renewals) from 2021 to 2041, with additional amounts dependent on the extent of revenues from customers of the facility other than CSL. The goodwill recorded as a result of this business combination is not tax deductible.

In addition, in the first nine months of 2021, the company acquired, within the Life Sciences Solutions segment, cell sorting technology assets, an Ireland-based life sciences distributor and a developer of a digital PCR platform and, within the Analytical Instruments segment, a Belgium-based developer of micro-chip based technology for liquid chromatography columns.

The components of the purchase prices and the allocations to the net assets acquired for 2021 acquisitions are as follows:


(In millions)	European Viral Vector Business		Mesa Biotech		Lengnau biologics manufacturing facility		Other
Purchase Price
Cash paid	$	853	$	423	$	—	$	287
Fair value of contingent consideration	—		65		1		113
Purchase price payable	—		—		17		—
Cash acquired	(19)		(14)		—		(11)
	$	834	$	474	$	18	$	389
Net Assets Acquired
Current assets	$	39	$	54	$	—	$	10
Property, plant and equipment	59		2		92		3
Definite-lived intangible assets:
Customer relationships	302		—		—		2
Product technology	25		279		—		220
Tradenames	—		2		—		3


Goodwill	603		239		18		190
Other assets	4		4		361		—
Contract liabilities	(59)		—		—		(1)
Deferred tax liabilities	(80)		(72)		—		(28)
Finance lease liabilities	(24)		(1)		(82)		—

Other liabilities assumed	(35)		(33)		(371)		(10)
	$	834	$	474	$	18	$	389

The weighted-average amortization periods for definite-lived intangible assets acquired in 2021 are 14 years for customer relationships, 7 years for product technology and 3 years for tradenames. The weighted average amortization period for all definite-lived intangible assets acquired in 2021 is 9 years.

The allocation of the purchase price for the Lengnau biologics manufacturing facility is preliminary, principally with respect to lease assets and liabilities as well as deferred taxes.