|12 Months Ended|
Sep. 30, 2013
3. Business Acquisitions
We completed the acquisition of Coperion on December 1, 2012, in a transaction valued at $540.7. The aggregate purchase consideration consisted of $269.1 of cash, net of cash acquired, and the assumption of $146.0 of debt and $125.6 of pension liabilities. We utilized $426.3 of borrowings under our revolving credit facility and cash on hand to finance the acquisition, including the repayment of $146.0 of debt outstanding under Coperion’s prior financing arrangements.
Based in Stuttgart, Germany, Coperion is a global leader in the manufacture of compounding, extrusion, and material handling equipment used in a broad range of industries, including plastics, chemicals, food processing, pharmaceutical, and aluminum. Coperion has been in business since 1879, and operates nine manufacturing sites in Germany, the United States (“U.S.”), China, and India, and has sales offices in approximately 30 locations in the Americas, Europe, and Asia. Coperion had approximately 2,100 employees worldwide as of September 30, 2013. Approximately one-third of Coperion’s revenue is derived from replacement parts and service, generating a large portion of recurring business due to its well-positioned service network and active installed base of equipment across the world.
Coperion revenues consist of sales of large systems, equipment, components, replacement parts, and service. Large system sales are generally fulfilled over 12 to 18 months, whereby customers generally pay a deposit and make progress payments in advance of delivery. Working capital requirements for Coperion generally range from an optimal negative working capital position, where cash received from customers is more heavily weighted toward the beginning of the project, to our current position where a larger portion of the cash will be received in later stages of manufacturing.
The Coperion business model includes large system projects, where strong application and process engineering expertise is used to create a broad system solution for customers. A certain amount of revenue for large system sales comes from third-party-sourced products that carry only a small up-charge. As a result, margins are lower on these large system sales when compared to the rest of the business. Hillenbrand believes that selling these complete systems provides a significant competitive advantage and increases margin dollars.
This acquisition was the largest in the Company’s history and represented an important step in the execution of our strategic plans to further diversify Hillenbrand and accelerate the growth of the Process Equipment Group. The integration of Coperion with the Process Equipment Group will continue to be a key initiative for the next 12 months. Combining our product offerings to provide a more complete system solution is our highest priority from an integration perspective. In addition, we believe leveraging Coperion’s global infrastructure will enable the existing businesses within the Process Equipment Group to enter new global markets more quickly. We also expect the Process Equipment Group’s existing strong U.S. sales network will enhance Coperion’s expansion in North America. Finally, the application of the Company’s Lean tools and other core competencies to Coperion’s operations is expected to contribute to improved margins and increased customer satisfaction.
The following table summarizes preliminary estimates of fair values of the assets acquired and liabilities assumed in the Coperion acquisition:
The estimation of fair value of Coperion’s assets and liabilities is preliminary and subject to adjustment based on finalization of the closing balance sheet. Purchase accounting adjustments totaling $34.4 were made to deferred income taxes, inventory, current assets, and current liabilities in 2013.
Goodwill is not deductible for tax purposes and was allocated entirely to the Process Equipment Group. Fair value amounts assigned to identifiable finite-lived intangible assets are being amortized on a straight-line basis over their estimated useful lives. The amounts and useful lives assigned to each asset type at the time of acquisition were:
The unaudited pro forma information for the periods set forth below gives effect to the Coperion acquisition as if it had occurred at the beginning of 2012. It included adjustments for additional interest expense, depreciation, and amortization. The unaudited pro forma information for 2012 included acquisition costs of $16.6 as well as backlog amortization and inventory step-up costs of $56.3. Acquisition costs, backlog amortization, and inventory step-up costs are not included in the pro forma information for 2013. The unaudited pro forma information is presented for informational purposes only and does not necessarily reflect the results of operations that would actually have been achieved had the acquisition been consummated as of that time.
(1)Pro forma net income attributable to Hillenbrand
We completed the acquisition of Rotex on August 31, 2011, for an aggregate purchase price of $248.1. The net cash purchase price was $240.4 when adjusted for cash acquired. The results of Rotex have been included in the Company’s consolidated results since the date of acquisition.
Batesville completed an acquisition in 2012 with a net purchase price of $5.9. Final estimation of the fair value resulted in $2.6 of goodwill.
We incurred $17.2 of business acquisition costs during 2013. These costs consist of $0.2 of cost of goods sold, $16.8 of operating expenses, and $1.2 of interest expense, partially offset by $1.0 of other income.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/presentationRef