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Divestitures Divestitures | 3 Months Ended
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Mar. 31, 2019
Divestitures [Abstract] |
Divestitures | Divestitures Proposed Divestiture of Hillerød, Denmark Manufacturing Operations In March 2019 we entered into a share purchase agreement with FUJIFILM Corporation (FUJIFILM) under which FUJIFILM will acquire all of the outstanding shares of our subsidiary that owns our biologics manufacturing operations in Hillerød, Denmark. Upon closing of the proposed transaction, we expect to receive up to $890.0 million in cash, subject to certain working capital adjustments and other contractual terms. As part of the proposed transaction, we have provided FUJIFILM with certain minimum batch production commitment guarantees. There is a risk that the minimum contractual batch production commitments will not be met. Based upon current estimates we expect to incur an adverse commitment obligation of approximately $120.0 million associated with such guarantees. We may adjust this estimate based upon changes in business conditions, which may result in the recognition of additional losses. We are also obligated to indemnify FUJIFILM for liabilities that may exist relating to certain business activities incurred prior to the closing of the proposed transaction. In addition, we may earn certain contingent payments based on future manufacturing activities at the Hillerød facility. For the disposition of a business, our policy is to recognize contingent consideration when the consideration is realizable. We currently believe the probability of earning these payments is remote and therefore we have not included these contingent payments in our estimate of the fair value of the operations. As part of the proposed transaction, we also expect to enter into certain manufacturing services agreements with FUJIFILM pursuant to which FUJIFILM would use the Hillerød facility to produce commercial products for us, such as TYSABRI, as well as other third-party products. We determined that the operations to be disposed of in the proposed transaction did not meet the criteria to be classified as discontinued operations under the applicable guidance. In February 2019 the assets and liabilities related to our Hillerød, Denmark manufacturing operations met the criteria to be classified as held for sale. The following table presents information related to the carrying value of the major classes of assets and liabilities that were reclassified as held for sale in our condensed consolidated balance sheets:
(In millions) | As of March 31, 2019
Assets: |
Inventory | $ | 27.0 |
Property, plant and equipment, net | 629.7 |
Operating lease assets | 2.5 |
Goodwill | 69.5 |
Other assets | 68.8 |
Valuation allowance on disposal group on assets held for sale | (115.5 | )
Assets held for sale | $ | 682.0 |
Liabilities: |
Accrued expenses and other liabilities | $ | 49.0 |
Long-term operating lease liabilities | 1.7 |
Deferred tax liability | 46.5 |
Liabilities held for sale | $ | 97.2 |
In the first quarter of 2019 we recorded a loss of approximately $174.6 million in our condensed consolidated statements of income. This estimated loss includes a pre-tax loss of $115.5 million reflecting our current estimated fair value of the assets and liabilities held for sale, adjusting for our expected costs to sell our Hillerød, Denmark manufacturing operations of approximately $10.0 million and our estimate of the fair value of an adverse commitment of approximately $120.0 million associated with the guarantee of future minimum batch production at the Hillerød facility. The value of this adverse commitment was determined using a probability-weighted estimate of future manufacturing activity. In addition, we recorded a tax expense of $59.1 million related to the proposed transaction. Our total estimated loss is based on current exchange rates and business conditions, and any changes to these factors through the closing date of the transaction will result in adjustments to the carrying values of the related assets and liabilities as well as a corresponding adjustment to the loss amount recognized on the sale. Following the closing of the proposed transaction, the final purchase price will be adjusted by an amount equal to the difference between our current estimates of working capital and inventory balances that will be transferred to FUJIFILM and the amounts that are ultimately transferred. Our estimate of the fair value of assets and liabilities expected to be sold to FUJIFILM is a Level 3 measurement and is based on the expected consideration from the sale, including the valuation of the adverse commitment, as discussed above. The proposed transaction remains subject to customary closing conditions, including filings and clearances under the Danish Competition Act. We expect to complete the proposed transaction in the second half of 2019. In addition, upon closing of the proposed transaction, we expect to separately sell certain raw materials remaining at the Hillerød facility to FUJIFILM at carrying value.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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