Business Combinations | 9 Months Ended |
Sep. 30, 2014 |
Business Combinations [Abstract] | ' |
Business Combinations | ' |
Note 2 — BUSINESS COMBINATIONS |
On March 13, 2013, PolyOne acquired Spartech Corporation (Spartech), a supplier of sustainable plastic sheet, color and engineered materials, and packaging solutions, based in Clayton, Missouri. PolyOne's management believes that the acquisition of Spartech will expand PolyOne's specialty portfolio and provide substantial synergies through enhanced operational efficiencies. By combining Spartech's leading market positions in sheet, rigid barrier packaging and specialty cast acrylics with PolyOne's capabilities, we believe that we can better serve our customers and accelerate growth. |
At the effective time of the merger, each issued and outstanding share of Spartech common stock was canceled and converted into the right to receive consideration equal to $2.67 in cash and 0.3167 shares of PolyOne common stock. PolyOne paid $83.4 million in cash and issued approximately 10.0 million shares of its common stock to Spartech's stockholders. PolyOne funded the cash portion of the consideration, and the repayment of certain portions of Spartech's debt, with a portion of the net proceeds of its issuance of 5.25% senior notes due 2023, discussed in Note 11, Financing Arrangements. |
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The Spartech purchase price was comprised of the following: |
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(In millions, except stock price and share data) | |
Spartech shares outstanding | 31.2 | |
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Spartech restricted stock units | 0.2 | |
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Spartech shares converted | 31.4 | |
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Exchange ratio | 0.3167 | |
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PolyOne shares issued | 10 | |
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PolyOne closing stock price on March 13, 2013 | $ | 25.05 | |
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Total value of PolyOne shares issued | $ | 249.9 | |
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Cash consideration transferred to Spartech shareholders | 83.4 | |
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Fair value of Spartech equity awards, net of deferred tax benefits (1) | 2.4 | |
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Total consideration transferred to Spartech equity holders | 335.7 | |
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Spartech revolving credit facilities repaid at close (2) | 77.2 | |
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Spartech senior notes repaid at close (2) | 102.3 | |
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Total consideration transferred to debt and equity holders | 515.2 | |
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Cash acquired | (4.1 | ) |
Total consideration transferred to debt and equity holders, net of cash acquired | $ | 511.1 | |
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(1) In accordance with ASC 718, Compensation — Stock Compensation, the fair value of replacement awards attributable to pre-combination service is recognized as part of the purchase consideration. The $2.4 million represents the fair value of Spartech replacement equity awards of $3.9 million net of deferred tax benefits of $1.5 million. The fair value of awards attributable to post-combination service amounted to $2.7 million and is being recognized as stock compensation expense over their requisite service periods within PolyOne's Condensed Consolidated Statements of Income. |
(2) In accordance with the provisions of Spartech's 7.08% senior notes due 2016 and revolving credit facilities, at the time of closing, PolyOne repaid all borrowings under Spartech's revolving credit facilities, which amounted to $77.2 million. Additionally, PolyOne repaid $102.3 million related to Spartech's 7.08% senior notes due 2016, including $88.9 million of aggregate principal, $10.3 million of make-whole provisions and $3.1 million of interest payable. |
The following table summarizes the final Spartech purchase price allocation: |
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(In millions) | |
Accounts receivable | $ | 139.7 | |
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Inventories | 114.4 | |
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Other current assets | 18.6 | |
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Property | 280.3 | |
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Other non-current assets | 19.6 | |
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Intangible assets | 44.6 | |
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Goodwill | 162.6 | |
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Total assets acquired | 779.8 | |
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Short-term and current portion of long-term debt | 0.5 | |
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Accounts payable | 105 | |
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Accrued expenses and other liabilities | 43.1 | |
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Long-term debt | 11 | |
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Other non-current liabilities | 109.1 | |
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Total liabilities assumed | 268.7 | |
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Net assets acquired | $ | 511.1 | |
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During the first quarter of 2014, we adjusted Goodwill by $9.4 million primarily related to our finalization of the assessment of income taxes. The 2013 Condensed Consolidated Financial Statements have not been retroactively adjusted as these measurement period adjustments did not have a material impact on such statements. |
Goodwill is calculated as the excess of the consideration transferred over the assets acquired, and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill has been allocated to the Designed Structures and Solutions, Global Color, Additives and Inks, and Performance Products and Solutions segments. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. See Note 4, Goodwill and Intangible Assets for further information. |
The following unaudited pro forma information presents a summary of PolyOne's Combined Statements of Income for the nine months ended September 30, 2013 as if the Spartech acquisition and related financing occurred on January 1, 2013. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction occurred on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies and the impact of incremental costs incurred in integrating the businesses: |
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(In millions) | Nine Months Ended September 30, 2013 |
Sales | $ | 3,065.60 | |
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Net income from continuing operations attributable to PolyOne common shareholders | $ | 73.8 | |
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The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are: (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact. |
During the nine months ended 2013, we incurred $7.2 million of acquisition-related costs primarily associated with the Spartech acquisition, which are included within the Selling and administrative expense line in our Condensed Consolidated Statements of Income. |