Acquisitions and Divestitures

3 Months Ended

Mar. 31, 2021

Note 2. Acquisitions and Divestitures

On April 1, 2021, we acquired Gourmet Food Holdings Pty Ltd, a leading Australian food company in the premium biscuit and cracker category, for closing cash consideration of approximately $458 million Australian dollars ($348 million). We incurred acquisition-related costs of $1 million during the three months ended March 31, 2021.

On March 25, 2021, we acquired a majority interest in Lion/Gemstone Topco Ltd ("Grenade"), a performance nutrition leader in the United Kingdom, for closing cash consideration of £188 million ($260 million), net of cash received. The acquisition of Grenade expands our position into the premium nutrition market. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $81 million to indefinite-lived intangible assets, $24 million to definite-lived intangible assets, $180 million to goodwill, $1 million to property, plant and equipment, $11 million to inventory, $18 million to accounts receivable, $1 million to other current assets, $25 million to current liabilities, $20 million to deferred tax liabilities and $11 million to long-term other liabilities. We incurred acquisition-related costs of $2 million during the three months ended March 31, 2021.

On January 4, 2021, we acquired the remaining 93% of equity of Hu Master Holdings, a category leader in premium chocolate in the United States, which provides a strategic complement to our snacking portfolio in North America through growth opportunities in chocolate and other categories in the well-being category. The initial cash consideration paid was $229 million, net of cash received, and the Company may be required to pay additional cash consideration. The estimated fair value of the contingent consideration obligation at the acquisition date was $132 million and was determined using a Monte Carlo simulation based on forecasted future results. We are unable to provide a range of amounts that could be paid as contingent consideration as it is based primarily on revenue and gross margin of the business for the twelve months ended December 31, 2022 and there is not a minimum or maximum payout. As a result of acquiring the remaining equity interest, we consolidated the operations prospectively from the date of acquisition and recorded a pre-tax gain of $9 million ($7 million after-tax) related to stepping up our previously-held $8 million (7%) investment to fair value. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $123 million to indefinite-lived intangible assets, $51 million to definite-lived intangible assets, $202 million to goodwill, $1 million to property, plant and equipment, $2 million to inventory, $4 million to accounts receivable, $5 million to current liabilities and $132 million to long-term other liabilities. During the three months ended March 31, 2021, the acquisition added incremental net revenues of $8 million and an operating loss of $6 million. We incurred acquisition-related costs of $4 million during the three months ended March 31, 2021.

On April 1, 2020, we acquired a majority interest in Give & Go, a North American leader in fully-finished sweet baked goods and owner of the famous two-bite® brand of brownies and the Create-A-Treat® brand, known for cookie and gingerbread house decorating kits. The acquisition of Give & Go provides access to the in-store bakery channel and expands our position in broader snacking. The purchase consideration for Give & Go totaled $1,136 million, net of cash received. We have recorded a preliminary purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as follows:


	(in millions)
Receivables	$	29
Inventory	38
Other current assets	6
Property, plant and equipment	136
Operating right of use assets	61
Definite-life intangible assets	511
Indefinite-life intangible assets	42
Goodwill	531
Assets acquired	$	1,354
Current liabilities	42
Deferred tax liabilities	92
Long-term operating lease liabilities	56
Long-term debt	6
Long-term other liabilities	19
Total purchase price	$	1,139
Less: cash received	3
Net Cash Paid	$	1,136

Within definite-life intangible assets, we allocated $416 million to customer relationships which have an estimated useful life of 17 years. Goodwill arises principally as a result of expansion opportunities and synergies across both new and legacy product categories. None of the goodwill recognized is expected to be deductible for income tax purposes.

The fair value for customer relationships at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The acquisition added incremental net revenues of $106 million and operating income of $6 million in the three months ended March 31, 2021. During the first quarter of 2020, we incurred $5 million of acquisition-related costs.