Acquisitions and Divestiture

3 Months Ended

Mar. 31, 2021

Acquisitions

In March 2021, the Company spent $263.9 million in cash, net of cash acquired, to acquire Magnetrol International ("Magnetrol"), Crank Software, and EGS Automation ("EGS"). Magnetrol is a leading provider of level and flow control solutions for challenging process applications across a diverse set of end markets including medical, pharmaceutical, oil and gas, food and beverage, and general industrial. Crank Software is a leading provider of embedded graphical user interface software and services. EGS is an automation solutions provider that designs and manufactures highly engineered, customized robotic solutions used in critical applications for the medical, food and beverage, and general industrial markets. Magnetrol and Crank Software are part of EIG. EGS is part of EMG.

The following table represents the allocation of the purchase price for the net assets of the acquisitions based on the estimated fair values at acquisition (in millions):


Property, plant and equipment	$	34.7
Goodwill	80.9
Other intangible assets	125.5

Net working capital and other(1)	22.8
Total cash paid	$	263.9

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(1)Includes $18.0 million in accounts receivable, whose fair value, contractual cash flows and expected cash flows are approximately equal.

The amount allocated to goodwill is reflective of the benefits the Company expects to realize from the 2021 acquisitions. Magnetrol's solutions combined with the Company’s existing Sensors, Test and Calibration business, becomes an industry leading differentiated sensor platform with a broad range of level and flow measurement solutions. Crank Software expands the Company's growing portfolio of software solutions. EGS complements the Company's existing Dunkermotoren business providing highly customizable engineering design and automation capabilities. The Company expects approximately all goodwill relating to the 2021 acquisitions will be tax deductible in future years.

At March 31, 2021, the purchase price allocated to other intangible assets of $125.5 million consists of $18.9 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $106.6 million of other intangible assets consists of $85.0 million of customer relationships, which are being amortized over a period of 18 to 20 years, and $21.6 million of purchased technology, which is being amortized over a period of 12 to 14 years. Amortization expense for each of the next five years for the 2021 acquisitions is expected to approximate $6 million per year.

The Company is in the process of finalizing the measurement of certain tangible and intangible assets and liabilities for its 2021 acquisitions including inventory, property, plant and equipment, goodwill, trade names, customer relationships and purchased technology, and the accounting for income taxes.

The acquisitions had an immaterial impact on reported net sales, net income and diluted earnings per share for the three months ended March 31, 2021. Had the acquisitions been made at the beginning of 2021 or 2020, unaudited pro forma net sales, net income and diluted earnings per share for the three months ended March 31, 2021 and 2020, respectively, would not have been materially different than the amounts reported.

Divestiture

The Company completed its sale of Reading Alloys to Kymera International in March 2020 for net cash proceeds of $245.3 million. The sale resulted in a pretax gain of $141.0 million, recorded in Other income, net in the Consolidated Statement of Income, and income tax expense of approximately $31.4 million in connection with the sale. Reading Alloys revenue and costs were reported within the EMG segment through the date of sale.

Acquisitions Subsequent to March 31, 2021

In April 2021, the Company acquired NSI-MI Technologies for approximately $230.0 million in cash. NSI-MI has estimated annual sales of approximately $90 million. NSI-MI is a leading provider of radio frequency and microwave test and measurement systems for niche applications across the aerospace, defense, automotive, wireless communications, and research markets. NSI-MI has joined EIG.

In April 2021, the Company acquired Abaco Systems, Inc. for approximately $1,350.0 million in cash. Abaco has estimated annual sales of approximately $325 million. Abaco specializes in open-architecture computing and electronic systems for aerospace, defense, and specialized industrial markets and is a leading provider of mission critical embedded computing systems. Abaco has joined EIG.