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Acquisitions | 9 Months Ended
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Sep. 30, 2015
Business Combinations [Abstract] |
Acquisitions | Acquisitions: On July 15, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire all the outstanding shares of Rockwood (the “Merger”). On January 12, 2015 (the “Acquisition Closing Date”), we completed the acquisition of Rockwood for a purchase price of approximately $5.7 billion. As a result, Rockwood became a wholly-owned subsidiary of Albemarle. The cash consideration was funded with proceeds from our 2014 Senior Notes, Term Loan, Cash Bridge Facility and February 2014 Credit Agreement, each of which is more fully described in Item 8 Financial Statements and Supplementary Data—Note 13, “Long-Term Debt,” in our Annual Report on Form 10-K for the year ended December 31, 2014. The fair value of the equity consideration was based on the closing price of Albemarle’s common stock on the Acquisition Closing Date of $59.70 per share, as reported on the New York Stock Exchange. Pursuant to the Merger Agreement, at the Acquisition Closing Date each issued and outstanding share of Rockwood common stock, par value $0.01 per share, (other than shares owned directly or indirectly by Albemarle, Rockwood or the Merger Sub, as defined in the Merger Agreement, and Appraisal Shares as defined in the Merger Agreement) was canceled and extinguished and converted into the right to receive (i) $50.65 in cash, without interest, and (ii) 0.4803 of a share of Albemarle common stock, par value $0.01 per share, (the “Merger Consideration”). Pursuant to the Merger Agreement, equity awards relating to shares of Rockwood’s common stock were canceled and converted into the right to receive the cash value of the Merger Consideration. On the Acquisition Closing Date, we issued approximately 34.1 million shares of Albemarle common stock. Subsequent to the acquisition of Rockwood, Albemarle continues to be a leading global developer, manufacturer and marketer of technologically advanced and high value-added specialty chemicals. We are a leading integrated and low cost global producer of lithium and lithium compounds used in lithium ion batteries for electronic devices, alternative transportation vehicles and energy storage technologies, meeting the significant growth in global demand for these products. We are also one of the largest global producers of surface treatments and coatings for metal processing, servicing the automotive, aerospace and general industrial markets. Included in Net sales and Net income attributable to Albemarle Corporation for the three-month period ended September 30, 2015 is approximately $359.8 million and $18.2 million, respectively, attributable to the businesses acquired from Rockwood. Included in Net sales and Net income attributable to Albemarle Corporation for the nine-month period ended September 30, 2015 is approximately $1.1 billion and $43.9 million, respectively, attributable to the businesses acquired from Rockwood. Our consolidated statements of income for the three-month and nine-month periods ended September 30, 2015 include $41.8 million and $120.5 million, respectively, of acquisition and integration related costs directly related to the acquisition of Rockwood (mainly consisting of advisory fees, costs to achieve synergies, relocation costs, and other integration costs) and $1.0 million and $6.0 million, respectively, of costs in connection with other significant projects. Acquisition and integration related costs directly related to the acquisition of Rockwood were $9.3 million during the three months and nine months ended September 30, 2014. Acquisition and integration related costs in connection with other significant projects were $1.0 million and $5.8 million during the three-month and nine-month periods ended September 30, 2014, respectively. Preliminary Purchase Price Allocation The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the Acquisition Closing Date, which were based, in part, upon outside preliminary appraisals for certain assets, including specifically-identified intangible assets. The excess of the purchase price over the preliminary estimated fair value of the net assets acquired was approximately $2.7 billion and was recorded as goodwill. The following table summarizes the consideration paid for Rockwood and the amounts of the assets acquired and liabilities assumed as of the acquisition date, which have been allocated on a preliminary basis (in thousands):
Purchase price: |
Cash paid | $ | 3,606,784 |
Shares issued | 2,036,550 |
Appraisal shares | 74,934 |
Total purchase price | $ | 5,718,268 |
Net assets acquired: |
Cash and cash equivalents | $ | 1,555,139 |
Trade and other accounts receivable | 262,947 |
Inventories | 292,503 |
Other current assets | 86,267 |
Property, plant and equipment | 1,395,684 |
Investments | 529,453 |
Other assets | 28,386 |
Definite-lived intangible assets: |
Patents and technology | 227,840 |
Trade names and trademarks | 258,740 |
Customer lists and relationships | 1,319,060 |
Indefinite-lived intangible assets: |
Trade names and trademarks | 104,380 |
Other | 27,450 |
Current liabilities | (409,799 | )
Long-term debt | (1,319,132 | )
Pension benefits | (316,086 | )
Other noncurrent liabilities | (168,435 | )
Deferred income taxes | (830,572 | )
Noncontrolling interests | (3,022 | )
Total identifiable net assets | 3,040,803 |
Goodwill | 2,677,465 |
Total net assets acquired | $ | 5,718,268 |
The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained. Significant changes in our purchase price allocation since our initial preliminary estimates reported in the first quarter of 2015 were primarily related to decreases in the estimated fair values of certain current assets, property, plant and equipment, investments, intangible assets, current liabilities and deferred income taxes, which resulted in an increase to recognized goodwill of approximately $52.6 million. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of property, plant and equipment, investments, intangible assets, environmental liabilities, appraisal shares, legal reserves, contingent liabilities, deferred income taxes and other assets and liabilities. The fair values of the assets acquired and liabilities assumed are based on management’s preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, it will evaluate any necessary information prior to finalization of the amounts. During the measurement-period, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement-period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement-period adjustments will be included in current period earnings. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets or goodwill, or require acceleration of the amortization of intangible assets in subsequent periods. Goodwill arising from the acquisition consists largely of the anticipated synergies and economies of scale from the combined companies and the overall strategic importance of the acquired businesses to Albemarle. The goodwill attributable to the acquisition will not be amortizable or deductible for tax purposes. The weighted-average amortization periods for the intangible assets acquired are 17 years for patents and technology, 20 years for trade names and trademarks and 24 years for customer lists and relationships. The weighted-average amortization period for all definite-lived intangible assets acquired is 23 years. Long-term debt assumed primarily includes Rockwood’s 4.625% senior notes with an aggregate principal amount of $1.25 billion and a fair value adjustment of approximately $43.7 million related to the senior notes. The fair value adjustment was based primarily on reported market values using Level 1 inputs. As discussed further in Note 18, “Recently Issued Accounting Pronouncements,” in the third quarter of 2015 the Company early-adopted new accounting guidance that changes the reporting requirements for measurement-period adjustments that occur in periods after a business combination is consummated. There were no significant measurement-period adjustments recorded in the consolidated statement of income for the three-months ended September 30, 2015 that related to previous reporting periods. Unaudited Pro Forma Financial Information The following unaudited pro forma results of operations of the Company for the three-month and nine-month periods ended September 30, 2015 and 2014 assume that the Merger occurred on January 1, 2014. The pro forma amounts include certain adjustments, including interest expense, depreciation, amortization expense and income taxes. Pro forma amounts were adjusted to include these costs. The pro forma amounts for the three-month and nine-month periods ended September 30, 2015 were adjusted to exclude approximately $41.8 million and $120.5 million, respectively, of nonrecurring acquisition and integration related costs, and approximately $16.8 million and $102.3 million, respectively, of charges related to the utilization of the inventory markup as further described in Note 11, “Segment Information.” The pro forma results do not include adjustments related to cost savings or other synergies that are anticipated as a result of the Merger. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred as of January 1, 2014, nor are they indicative of future results of operations.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
| (in thousands, except per share amounts)
Pro forma Net sales | $ | 905,093 |  |  | $ | 998,718 |  |  | $ | 2,754,312 |  |  | $ | 2,920,082 |
Pro forma Net income from continuing operations | $ | 111,211 |  |  | $ | 143,675 |  |  | $ | 335,602 |  |  | $ | 316,238 |
Pro forma Net income from continuing operations per share: |  |  |  |  |  |  |
Basic | $ | 0.99 |  |  | $ | 1.28 |  |  | $ | 3.03 |  |  | $ | 2.79 |
Diluted | $ | 0.99 |  |  | $ | 1.27 |  |  | $ | 3.02 |  |  | $ | 2.76 |
Litigation Related to the Merger On February 19, 2015, Verition Multi-Strategy Master Fund Ltd. and Verition Partners Master Fund Ltd, who collectively owned approximately 882,000 shares of Rockwood common stock immediately prior to the Merger, commenced an action in the Delaware Chancery Court seeking appraisal of their shares of Rockwood common stock pursuant to Delaware General Corporation Law § 262. These shareholders exercised their right not to receive the Merger Consideration for each share of Rockwood common stock owned by such shareholders. Following the Merger, these shareholders ceased to have any rights with respect to their Rockwood shares, except for their rights to seek an appraisal of the cash value of their Rockwood shares under Delaware law. On March 16, 2015, Albemarle, on behalf of Rockwood, filed an Answer and Verified List in response to the appraisal petition. On November 2, 2015, the court granted the parties’ jointly stipulated amended scheduling order, which set forth dates for fact and expert discovery, as well as trial. Fact discovery has commenced and remains ongoing, and the Court has set a date of June 27, 2016 for trial on the merits. While Albemarle intends to vigorously defend against this action, the outcome of the appraisal process cannot be predicted with any certainty at this time. Included in Accrued expenses in our condensed consolidated balance sheet at September 30, 2015 is an estimated liability of $74.9 million in connection with this portion of the Merger Consideration. The fair value of the liability was considered a Level 2 measurement as the value was based on inputs other than quoted prices that are observable for the liability. Acquisition of Remaining Interest in Shanghai Chemetall Chemicals Co., Ltd. On January 29, 2015, we acquired the remaining 40% interest in Shanghai Chemetall Chemicals Co., Ltd., (“Shanghai Chemetall”) for approximately $57.6 million ($45.6 million net of cash acquired), the proceeds of which came from the release of restricted cash acquired from Rockwood at closing. As of the acquisition date, Shanghai Chemetall became a wholly-owned subsidiary of Albemarle and is being consolidated into the Chemetall® Surface Treatment segment. The purchase price and the fair value of our equity interest immediately before the date of acquisition (approximately $60 million), as well as the fair value of the noncontrolling interest in Nanjing Chemetall Surface Technologies Co., Ltd., have been allocated to the net assets acquired at the acquisition date. The purchase price allocation, including the residual amount allocated to goodwill, is preliminary and subject to change based on the finalization of the valuation of assets and liabilities and the fair value of the previously held equity investment.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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