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Divestitures and Acquisitions | 3 Months Ended
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Mar. 31, 2015
Divestitures and Acquisitions | Note 2. Divestitures and Acquisitions Planned Coffee Business Transactions: On May 7, 2014, we announced that we entered into an agreement to combine our wholly owned coffee portfolio (outside of France) with D.E Master Blenders 1753 B.V. (“DEMB”). In conjunction with this transaction, Acorn Holdings B.V. (“AHBV”), owner of DEMB, also made a binding offer to receive our coffee business in France. The parties also invited our partners in certain joint ventures to join the new company. During the first quarter of 2015, we entered into an agreement to sell our interest in a Japanese coffee joint venture to our joint venture partner so they may operate the business independently. In lieu of contributing our interest in the joint venture, we will instead contribute the net cash proceeds from the sale of the interest. Please see discussion of the pending divestiture of the Japanese coffee joint venture below under Other Divestiture and Acquisitions. Upon completion of all proposed transactions, we expect to receive cash of approximately €4 billion and an equity interest of approximately 49 percent in the new company, to be called Jacobs Douwe Egberts (“JDE”). AHBV will hold a majority share in the proposed combined company and will have a majority of the seats on the board, which will be chaired by current DEMB Chairman Bart Becht. We will have certain minority rights. AHBV is owned by an investor group led by JAB Holding Company s.à r.l. Once we have contributed our coffee businesses to the new company, we expect to record our interest in JDE as an equity method investment on our consolidated balance sheet and to include our share of its earnings prospectively within our continuing results of operations. We also anticipate recording a gain on the divested assets of our coffee business portfolio. The transactions remain subject to regulatory approvals and the completion of employee information and consultation requirements. We continue to expect the transactions to be completed in the third quarter of 2015, subject to closing conditions, including regulatory approvals. In December 2014, the European Commission announced its intention to further evaluate the proposed transaction against EU antitrust regulations and in order to make a final determination on merger clearance, which we currently expect in the second quarter of 2015. We and DEMB also continue to undertake consultations with Works Councils and employee representatives as required in connection with the transactions. In connection with the expected receipt of approximately €4 billion upon closing, we entered into currency exchange forward contracts in the second quarter of 2014 to lock in an expected U.S. dollar value of approximately $5 billion. On February 11, 2015, we monetized these forward contracts and realized total pre-tax gains of $939 million, of which $311 million was recognized in the first quarter of 2015. We also entered into new currency exchange forward contracts to lock in an expected euro/U.S. dollar exchange rate on the expected €4 billion cash receipt that generated a $240 million unrealized gain in the first quarter of 2015. The unrealized gain was recorded within interest and other expense, net and the asset derivative is recorded within other current assets. On April 17, 2015, we monetized the new forward contracts for a realized gain of $296 million and executed new currency exchange forward contracts to continue to lock in an expected U.S. dollar value on the receipt of the €4 billion at closing. Based on changes in the euro/U.S. dollar exchange rate, the actual closing date of the planned coffee business transactions and the settlement dates of the hedges or other hedges we may put into place, the actual amount of U.S. dollars we receive could change. We have incurred incremental expenses related to readying our coffee businesses for the planned transactions that totaled $28 million in the three months ended March 31, 2015 and were recorded within selling, general and administrative expenses of primarily our Europe and Eastern Europe, Middle East and Africa segments and within our general corporate expenses. Other Divestiture and Acquisitions: On February 27, 2015, we announced our agreement to sell our 50 percent interest in a Japanese coffee joint venture to our joint venture partner. During the first quarter of 2015, we reclassified our $96 million held for sale investment from long-term other assets to other current assets, and we recognized $32 million of tax charges related to the pending sale. We also will divest $42 million of cumulative translation losses in connection with the sale. On April 23, 2015, we closed on the transaction and received cash proceeds of 27 billion Japanese yen ($225 million U.S. dollars as of April 23, 2015). On February 16, 2015, we acquired a U.S. snacking company, Enjoy Life Foods (“Enjoy Life”) within our North America segment. We paid cash and settled debt totaling $81 million in connection with the acquisition. As of March 31, 2015, we recorded a preliminary $81 million purchase price allocation of $58 million in estimated identifiable intangible assets, $19 million of estimated goodwill and $4 million of other net assets. We currently expect to finalize the valuation in the second quarter of 2015. The acquisition-related costs and operating results of the acquisition were not material to our condensed consolidated financial statements as of and for the three months ended March 31, 2015. On November 11, 2014, we announced the pending acquisition of a biscuit operation in Vietnam. The biscuit operation will become a subsidiary within our Asia Pacific segment. The total consideration to be paid is expected to be up to 12,656 billion Vietnamese dong ($596 million U.S. dollars as of March 31, 2015). We expect to close the initial phase of the transaction in mid 2015 after regulatory and other matters are resolved. We deposited $46 million in escrow upon signing the purchase agreement on November 10, 2014. We expect to pay approximately 9,935 billion Vietnamese dong ($468 million U.S. dollars as of March 31, 2015) and deposit an additional 991 billion Vietnamese dong ($47 million U.S. dollars as of March 31, 2015) in escrow upon completing the initial phase of the transaction in mid 2015, which we expect to fund from current borrowing capacity. The balance will be paid upon the satisfaction of final conditions, including the resolution of warranty or other claims and purchase price adjustments.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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