Acquisitions and Divestiture

9 Months Ended

Sep. 30, 2021

Acquisitions

The Company spent $1,839.7 million in cash, net of cash acquired, to acquire Magnetrol International ("Magnetrol"), Crank Software, and EGS Automation ("EGS") in March 2021, and NSI-MI Technologies ("NSI-MI") and Abaco Systems, Inc. ("Abaco") in April 2021. 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. 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. 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. Magnetrol, Crank Software, NSI-MI, and Abaco 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):


	Abaco		Other Acquisitions		Total
	(in millions)
Property, plant and equipment	$	56.2	$	39.2	$	95.4
Goodwill	737.9		244.7		982.6
Other intangible assets	616.9		252.8		869.7
Deferred income taxes	(122.2)		(30.5)		(152.7)
Net working capital and other(1)	57.1		(12.4)		44.7
Total cash paid	$	1,345.9	$	493.8	$	1,839.7

________________

(1)Includes $66.2 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. Abaco's computing and electronic solutions expand and complement the Company's existing aerospace and defense businesses. NSI-MI strengthens the Company's test and measurement platform. 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 $108 million of the goodwill relating to the 2021 acquisitions will be tax deductible in future years.

At September 30, 2021, the purchase price allocated to other intangible assets of $869.7 million consists of $116.1 million of indefinite-lived intangible trade names, which are not subject to amortization. The remaining $753.6 million of other intangible assets consists of $569.9 million of customer relationships, which are being amortized over a period of 15 to 20 years, and $183.7 million of purchased technology, which is being amortized over a period of 11 to 20 years. Amortization expense for each of the next five years for the 2021 acquisitions is expected to approximate $41 million per year.

At September 30, 2021, the Company finalized the measurements of certain tangible and intangible assets and liabilities for its 2021 acquisitions of EGS and Crank Software, which had no material impact to the consolidated statement of income. The Company is in the process of finalizing the measurement of the intangible assets and certain tangible assets and liabilities, as well as accounting for income taxes, for its 2021 acquisitions of Abaco, Magnetrol, and NSI-MI.

The acquisitions had an immaterial impact on reported net income and diluted earnings per share for the three and nine months ended September 30, 2021. The acquisitions increased net sales by approximately 11% and 6% for the three and nine months ended September 30, 2021, respectively. Had the acquisitions been made at the beginning of 2021 or 2020, pro forma net income and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020, would not have been materially different than the amounts reported. Pro forma net sales would not have been materially different than the amounts reported for the three and nine months ended September 30, 2021 and would have been approximately 10% higher than the reported amounts for the three and nine months ended September 30, 2020.

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.