Acquisition | 3 Months Ended |
Mar. 31, 2015 |
Business Combinations [Abstract] | |
Acquisition | Acquisition |
On February 13, 2014 (Acquisition Date), we acquired DVS primarily to broaden our addressable single-cell biology market opportunity and complement our existing product offerings. DVS develops, manufactures, markets, and sells high-parameter single-cell protein analysis systems and related reagents and data analysis tools. DVS’s principal market is the life sciences research market consisting of drug development companies, government research centers, and universities worldwide. |
The contractual price for the acquisition was $207.5 million, subject to certain adjustments as specified in the merger agreement. The aggregate purchase price was determined to be $199.9 million, as detailed in the table below (in thousands): |
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| | Estimated Fair Value | | | | | | | | | | | | | | | |
Cash | | $ | 126,048 | | | | | | | | | | | | | | | | |
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Issued 1,759,007 shares of Fluidigm common stock | | 76,805 | | | | | | | | | | | | | | | | |
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Acquisition consideration paid at Acquisition Date | | 202,853 | | | | | | | | | | | | | | | | |
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Accelerated stock compensation (1) | | (6,690 | ) | | | | | | | | | | | | | | | |
Estimated fair value of vested Fluidigm equivalent stock options (2) | | 4,039 | | | | | | | | | | | | | | | | |
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Working capital adjustment | | (269 | ) | | | | | | | | | | | | | | | |
Aggregate purchase price | | $ | 199,933 | | | | | | | | | | | | | | | | |
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-1 | As a part of the acquisition, we accelerated vesting of certain DVS stock options and shares of restricted stock, and incurred a $6.7 million expense, based upon the per share consideration paid to holders of shares of DVS common stock as of February 13, 2014. This expense is accounted for as a separate transaction and reflected in the acquisition-related expenses line of the condensed consolidated statements of operations. | | | | | | | | | | | | | | | | | | |
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-2 | In conjunction with the acquisition, we assumed all outstanding DVS stock options and unvested shares of restricted stock and converted, as of the Acquisition Date, the unvested stock options outstanding under the DVS stock option plan | | | | | | | | | | | | | | | | | | |
into unvested stock options to purchase approximately 143,000 shares of Fluidigm common stock and the unvested DVS restricted stock into approximately 186,000 shares of restricted Fluidigm common stock, retaining the original vesting schedules. The fair value of all converted share-based awards was $14.6 million, of which $4.0 million was attributed to the pre-combination service period and was included in the calculation of the purchase price. The remaining fair value will be recognized over the awards’ remaining vesting periods subsequent to the acquisition. The fair value of the Fluidigm equivalent share-based awards as of the Acquisition Date was estimated using the Black-Scholes valuation model. |
Approximately 885,000 shares of Fluidigm common stock, with a fair value of $38.6 million as of the Acquisition Date, representing 50.3030% of the shares otherwise payable to the former stockholders of DVS, were deposited into escrow. These shares comprise a portion of the merger consideration and are being held in escrow to secure indemnification obligations under the merger agreement, if any, for a period of 13 to 18 months following the Acquisition Date, subject to any then pending indemnification claims. Under the terms of the merger agreement, fifty percent (50.0%) of the aggregate shares subject to the indemnification escrow were eligible for release on March 13, 2015 (Initial Release Date), and the balance of the shares would become eligible for release on August 13, 2015, provided that in each case shares will continue to be held in escrow in amounts that we may reasonably determine in good faith to be necessary to satisfy any claims for which we have delivered a notice of claim which has not been fully resolved between us and the representative of the former stockholders of DVS (Stockholder Representative). Prior to the Initial Release Date, we submitted escrow claim notices under the terms of the merger agreement. On April 9, 2015, the Stockholder Representative provided notices objecting to our claims. We are currently in discussions with the Stockholder Representative regarding the claims. Pursuant to the terms of the merger agreement, if the parties do not reach an agreement by May 9, 2015, either party may seek to resolve the dispute by filing an action with the Court of Chancery of the State of Delaware. As of the date of this filing, no shares have been released from the escrow, and we cannot predict whether the dispute will result in litigation, whether we would prevail in any such litigation, and whether and to what extent we will be able to recover shares from the escrow. |
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Net Assets Acquired |
The transaction has been accounted for using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date. The following table summarizes the assets acquired and liabilities assumed as of the Acquisition Date (in thousands): |
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| | Allocation of purchase price | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 8,405 | | | | | | | | | | | | | | | | |
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Accounts receivable, net | | 7,698 | | | | | | | | | | | | | | | | |
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Inventories | | 3,489 | | | | | | | | | | | | | | | | |
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Prepaid expenses and other current assets | | 1,482 | | | | | | | | | | | | | | | | |
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Property and equipment, net | | 1,202 | | | | | | | | | | | | | | | | |
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Developed technology | | 112,000 | | | | | | | | | | | | | | | | |
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Goodwill | | 104,108 | | | | | | | | | | | | | | | | |
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Other non-current assets | | 88 | | | | | | | | | | | | | | | | |
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Total assets acquired | | 238,472 | | | | | | | | | | | | | | | | |
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Accounts payable | | (1,114 | ) | | | | | | | | | | | | | | | |
Accrued compensation and related benefits | | (761 | ) | | | | | | | | | | | | | | | |
Other accrued liabilities | | (1,204 | ) | | | | | | | | | | | | | | | |
Deferred revenue, current portion | | (1,844 | ) | | | | | | | | | | | | | | | |
Tax payable | | (45 | ) | | | | | | | | | | | | | | | |
Deferred tax liability | | (31,942 | ) | | | | | | | | | | | | | | | |
Deferred revenue, net of current portion | | (1,629 | ) | | | | | | | | | | | | | | | |
Net assets acquired | | $ | 199,933 | | | | | | | | | | | | | | | | |
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The following table provides details of intangible assets acquired in connection with the DVS acquisition as of March 31, 2015 (in thousands, except years): |
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| | Gross | | | Accumulated | | | Net | | | Useful Life | |
Amortization | (years) |
Developed technology | | $ | 112,000 | | | | $ | (12,600 | ) | | | $ | 99,400 | | | | | 10 | |
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We recognized $2.8 million and $1.4 million in intangible asset amortization expense during the three months ended March 31, 2015 and 2014, respectively. |
The $104.1 million of goodwill recognized as part of the transaction is attributable primarily to expected synergies and other benefits from the acquisition, including expansion of our addressable market from the single-cell genomics market to the larger single-cell biology market and the ability to leverage our larger global commercial sales organization and infrastructure to expand awareness of DVS's products and technology. Goodwill is not expected to be deductible for income tax purposes. There were no changes in goodwill between December 31, 2014 and March 31, 2015. |
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Acquisition Costs |
Acquisition-related expenses were $10.7 million for the three months ended March 31, 2014 and primarily included accelerated vesting of certain DVS restricted stock and options, and consulting, legal, and investment banking fees. These costs are included within the acquisition-related expenses line of the condensed consolidated statements of operations. |