Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

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 Level 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 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 Level 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 Level 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.