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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisitions and Divestitures | Note 2. Acquisitions and Divestitures Acquisitions Ricolino On November 1, 2022, we acquired 100% of the equity of Grupo Bimbo's confectionery business, Ricolino, located primarily in Mexico. The acquisition of Ricolino builds on our continued prioritization of fast-growing snacking segments in key geographies. The cash consideration paid for Ricolino totaled $26 billion Mexican pesos ($1.3 billion), net of cash received. We have completed the valuation of assets acquired and liabilities assumed and have recorded a purchase price allocation of:
| (in millions)
Cash | $ | 22 |
Receivables | 86 |
Inventory | 70 |
Other current assets | 3 |
Property, plant and equipment | 139 |
Operating leases right-of-use assets | 23 |
Definite-life intangible assets | 218 |
Indefinite-life intangible assets | 339 |
Goodwill | 721 |
Other assets | 3 |
Assets acquired | 1,624 |
Current liabilities | 182 |
Deferred tax liability | 75 |
Operating lease liabilities | 23 |
Other liabilities | 14 |
Total purchase price | 1,330 |
less: cash received | (22) |
Net Cash Paid | $ | 1,308 |
Within identifiable intangible assets, we allocated $339 million to trade names, which have an indefinite life. The fair value for the Ricolino, Dulces Vero, LaCorona and Coronado trade names were determined using the relief from royalty method, a form of the income approach, at the acquisition date. The fair value measurement of indefinite-life intangible assets are based on significant unobservable inputs, and thus represent Leve l 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include estimates of future sales, discount and royalty rates. Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired and arises principally as a result of expansion opportunities and synergies across both new and legacy product categories in Mexico. None of the goodwill recognized is expected to be deductible for income tax purposes. All of the goodwill was assigned to the Latin American operating segment. We incurred acquisition integration costs of $50 million in 2023. We incurred acquisition integration costs of $11 million and an inventory step-up charge of $5 million in 2022. In 2022, we recorded several items within acquisition-related costs that resulted in income of $64 million as realized gains related to hedging contracts associated with acquisition funds more than offset other acquisition transaction costs. Clif Bar On August 1, 2022, we acquired 100% of the equity of Clif Bar & Company (“Clif Bar”), a leading U.S. maker of nutritious energy bars with organic ingredients. The acquisition expands our global snack bar business and complements our refrigerated snacking and performance nutrition bar portfolios. The total cash payment of $2.9 billion includes purchase price consideration of $2.6 billion, net of cash received, and one-time compensation expense of $0.3 billion related to the buyout of the non-vested employee stock ownership plan ("ESOP") shares. This compensation expense is considered an acquisition-related cost. The acquisition of Clif Bar includes a contingent consideration arrangement that may require us to pay additional consideration to the sellers for achieving certain revenue and earnings targets in 2025 and 2026 that exceed our base financial projections for the business implied in the upfront purchase price. The possible payments range from zero to a maximum total of $2.4 billion, with higher payouts requiring the achievement of targets that generate rates of returns in excess of the base financial projections. The estimated fair value of the contingent consideration obligation at the acquisition date was $440 million determined using a Monte Carlo simulation. Significant assumptions used in assessing the fair value of the liability include financial projections for net revenue, gross profit, and earnings before interest, tax, depreciation and amortization ("EBITDA"), as well as discount and volatility rates. We have completed the valuation of assets acquired and liabilities assumed and have recorded a purchase price allocation of:
| (in millions)
Cash | $ | 99 |
Receivables | 76 |
Inventory | 123 |
Other current assets | 9 |
Property, plant and equipment | 186 |
Operating leases right-of-use assets | 22 |
Deferred tax assets | 107 |
Definite-life intangible assets | 200 |
Indefinite-life intangible assets | 1,450 |
Goodwill | 988 |
Other assets | 11 |
Assets acquired | 3,271 |
Current liabilities | 159 |
Contingent consideration | 440 |
Other liabilities | 15 |
Total purchase price | 2,657 |
less: cash received | (99) |
Net Cash Paid | $ | 2,558 |
Within identifiable intangible assets, we allocated $1,450 million to trade names, which have an indefinite life. The fair value for the Clif and Luna trade names were determined using the r elief from royalty method, a form of the income approach, at the acquisition date. The fair value measurement of indefinite-life intangible assets are based on significant unobservable inputs, and thus represent Leve l 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include estimates of future sales, discount and royalty rates. We expect to generate a meaningful cash tax benefit over time from the amortization of acquisition-related intangibles. Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired and arises principally as a result of expansion opportunities and synergies across the U.S. and other key markets. All of the goodwill was assigned to the North America operating segment. Tax deductible goodwill is estimated to be $1.4 billion and is being amortized. We incurred acquisition integration costs and contingent consideration adjustments of $164 million in 2023 and $30 million in 2022. These costs include an increase to the contingent consideration liability due to changes to underlying assumptions. Refer to Note 10, Financial Instruments for additional information. We also incurred acquisition-related costs of $296 million and an inventory step-up charge of $20 million in 2022. The acquisition-related costs are primarily related to the buyout of the non-vested ESOP shares. Chipita On January 3, 2022, we acquired 100% of the equity of Chipita Global S.A. (“Chipita”), a leading croissants and baked snacks company in the Central and Eastern European markets. The acquisition of Chipita offers a strategic complement to our existing portfolio and advances our strategy to become the global leader in broader snacking. The cash consideration paid for Chipita totaled €1.2 billion ($1.4 billion), net of cash received, plus the assumption of Chipita’s debt of €0.4 billion ($0.4 billion) for a total purchase price of €1.7 billion ($1.8 billion). We have completed the valuation of assets acquired and liabilities assumed and have recorded a purchase price allocation of:
| (in millions) |
Cash | $ | 52 |  |
Receivables | 102 |  |
Inventory | 60 |  |
Other current assets | 3 |  |
Property, plant and equipment | 379 |  |
Finance leases right-of-use assets | 8 |  |
Definite-life intangible assets | 48 |  |
Indefinite-life intangible assets | 686 |  |
Goodwill | 795 |  |
Other assets | 77 |  |
Assets acquired | 2,210 |  |
Current liabilities | 133 |  |
Deferred tax liability | 158 |  |
Finance lease liabilities | 8 |  |
Other liabilities | 21 |  |
Total purchase price | 1,890 |  |
Less: long-term debt | (436) |  |
less: cash received | (52) |  |
Net Cash Paid | $ | 1,402 |  |
Within identifiable intangible assets, we allocated $686 million to trade name, which have an indefinite life. The fair value for the 7 Days trade name, which is the primary asset acquired, was determined using the multi-period excess earnings method under the income approach at the acquisition date. The fair value measurements of indefinite-life intangible assets are based on significant unobservable inputs, and thus represent Leve l 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include forecasted future cash flows and discount rates. Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired and 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. All of the goodwill was assigned to the Europe operating segment. We incurred acquisition integration costs of $17 million in 2023. We incurred acquisition integration costs of $90 million in 2022 and $17 million in 2021. We incurred acquisition-related costs of $22 million in 2022 and $6 million in 2021. Other Acquisitions On April 1, 2021, we acquired Gourmet Food, a leading Australian food company in the premium biscuit and cracker category, for closing cash consideration of approximately $450 million Australian dollars ($343 million), net of cash received. We have recorded a purchase price allocation of $41 million to indefinite-lived intangible assets, $80 million to definite-lived intangible assets, $164 million to goodwill, $19 million to property, plant and equipment, $18 million to inventory, $25 million to accounts receivable, $12 million to other assets, $5 million to operating right-of-use assets, $3 million to other current assets, $19 million to current liabilities and $5 million to long-term operating lease liabilities. In 2022, through the one-year anniversary of the acquisition, Gourmet Food added incremental net revenues of $14 million, and operating income of $1 million. We incurred acquisition integration costs of $3 million in 2023. We incurred acquisition integration costs of $1 million in 2022. We incurred acquisition-related costs of $7 million in 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 ($261 million), net of cash received. The acquisition of Grenade expands our position into the premium nutrition market. We have recorded a purchase price allocation of $82 million to indefinite-lived intangible assets, $28 million to definite-lived intangible assets, $181 million to goodwill, $1 million to property, plant and equipment, $11 million to inventory, $18 million to accounts receivable, $25 million to current liabilities, $20 million to deferred tax liabilities and $15 million to long-term other liabilities. In 2022, through the one-year anniversary of the acquisition, Grenade added incremental net revenues of $21 million, and operating income of $2 million. We incurred acquisition-related costs of $2 million in 2021. On January 4, 2021, we acquired the remaining 93% of equity of Hu Master Holdings (“Hu”), 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 offerings in the well-being category. The initial cash consideration paid was $229 million, net of cash received, and we may be required to pay additional contingent 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. During 2021, based on latest estimates, we recorded a $70 million reduction to the liability as recent economic and market conditions related to COVID-19 and supply chain challenges in the U.S. impacted the pace of growth. During 2022, we recorded an additional $7 million reduction to the liability due to further changes to forecasted future results. During 2023, we recorded an additional $8 million reduction to the liability due to the final settlement and payment of the contingent consideration. Refer to Note 10, Financial Instruments for additional information. 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 have recorded a 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. We incurred acquisition-related costs of $9 million in 2021. Divestitures Developed Market Gum On October 1, 2023, we completed the sale of our developed market gum business in the United States, Canada and Europe to Perfetti Van Melle Group, excluding the Portugal business which we retained pending regulatory approval. After obtaining the regulatory approval, we completed the sale of the Portugal business to Perfetti Van Melle Group on October 23, 2023. We received cash proceeds of $1.4 billion. We recorded a pre-tax gain of $108 million on the sale. We recorded divestiture-related costs of $83 million for the year ended December 31, 2023 and $15 million for the year ended December 31, 2022. This disposal group met the held for sale criteria as of December 31, 2022 and was included as part of the North America and Europe operating segments. Total assets and liabilities held for sale were comprised of the following:
|  | As of December 31, 2022
Assets held for sale |  |
Inventories, net |  | $ | 79 |
Current assets held for sale (1) |  | 79 |
Property, plant and equipment, net |  | 159 |
Goodwill |  | 292 |
Intangible assets, net |  | 671 |
Noncurrent assets held for sale (2) |  | 1,122 |
Total assets held for sale |  | $ | 1,201 |
Liabilities held for sale |  |
Accrued employment costs |  | $ | 4 |
Current liabilities held for sale (3) |  | 4 |
Deferred income taxes |  | 15 |
Noncurrent liabilities held for sale (4) |  | 15 |
Total liabilities held for sale |  | $ | 19 |
(1)Reported in Other current assets on the consolidated balance sheets. (2)Reported in Other assets on the consolidated balance sheets. (3)Reported in Other current liabilities on the consolidated balance sheets. (4)Reported in Other liabilities on the consolidated balance sheets. MaxFoods On November 1, 2021, we completed the sale of MaxFoods Pty Ltd, an Australian packaged seafood business that we had acquired as part of our acquisition of Gourmet Food Holdings Pty Ltd (“Gourmet Food”). The sales price was $57 million Australian dollars ($41 million), net of cash divested with the business, and we recorded an immaterial loss on the transaction. The packaged seafood business added incremental net revenues of $35 million in 2021 and operating income of $5 million during 2021. Neither of these dispositions were considered a strategic shift that will have a major effect on our operations or financial results; therefore, the results of each disposed business were not classified as discontinued operations.

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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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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