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Acquisitions | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisitions | Acquisitions: On October 31, 2019 (the “Acquisition Closing Date”), we completed the previously announced acquisition of a 60% interest in Mineral Resources Limited’s (“MRL”) Wodgina hard rock lithium mine project (“Wodgina Project”) for a total purchase price of approximately $1.3 billion. The purchase price is comprised of $820 million in cash and the transfer of 40% interest in certain lithium hydroxide conversion assets being built by Albemarle in Kemerton, Western Australia, valued at $480 million. The cash consideration was initially funded by the 2019 Credit Facility entered into on August 14, 2019. In addition, during the first nine months of 2020, we paid $22.6 million of agreed upon purchase price adjustments. The stamp duty levied on the assets purchased of $61.5 million, originally recorded as an expense during the year ended December 31, 2019, was paid in the second quarter of 2020 and is included in Change in working capital on the condensed consolidated statement of cash flows. In addition, we have formed an unincorporated joint venture with MRL, MARBL, for the exploration, development, mining, processing and production of lithium and other minerals from the Wodgina Project and for the operation of the Kemerton assets. We are entitled to a pro rata portion of 60% of all minerals (other than iron ore and tantalum) recovered from the tenements and produced by the joint venture. The joint venture is unincorporated with each investor holding an undivided interest in each asset and proportionately liable for each liability; therefore, our proportionate share of assets, liabilities, revenue and expenses are included in the appropriate classifications in the consolidated financial statements. As part of this acquisition, MARBL Lithium Operations Pty. Ltd. (the “Manager”), an incorporated joint venture, has been formed to manage the Wodgina Project. We consolidate our 60% ownership interest in the Manager in our consolidated financial statements. This acquisition provides access to a high-quality hard rock lithium source, further diversifying our global lithium resource base, and strengthens our position by increasing capacity to support future market demand. In connection with the acquisition, we idled production of the Wodgina spodumene mine until demand supports bringing the mine back to production. The results of our 60% ownership interest in MARBL are reported within the Lithium segment. Included in Net income attributable to Albemarle Corporation for the three-month and nine-month periods ended September 30, 2020 is a loss of approximately $4.7 million and $14.6 million, respectively, attributable to the joint venture. There were no net sales attributable to the joint venture during this period. Included in Selling, general and administrative expenses (“SG&A”) on our consolidated statements of income for the three-month and nine-month periods ended September 30, 2020 and 2019 is $0.2 million and $1.0 million, respectively, and $1.3 million and $4.4 million, respectively, of costs directly related to this acquisition, primarily consisting of professional services and advisory fees. Pro forma financial information of the combined entities for periods prior to the acquisition is not presented due to the immaterial impact of the Net Sales and Net Income of the Wodgina Project on our consolidated statements of income. 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 third-party appraisals for certain assets. The excess of the purchase price over the preliminary estimated fair value of the net assets acquired was approximately $18.8 million and was recorded as Goodwill. The following table summarizes the consideration paid for the joint venture 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):
Total purchase price: |
Cash paid | $ | 820,000 |
Fair value of 40% interest in Kemerton assets | 480,000 |
Purchase agreement completion adjustment and other adjustments | 22,566 |
Total purchase price | $ | 1,322,566 |
Net assets acquired: |
Inventories | $ | 33,900 |
Other current assets | 11,280 |
Property, plant and equipment: |
Land improvements | 2,912 |
Buildings and improvements | 19,268 |
Machinery and equipment | 163,808 |
Mineral rights and reserves | 1,058,700 |
Construction in progress | 103,700 |
Current liabilities | (10,695) |
Long-term debt(a) | (55,806) |
Other noncurrent liabilities | (23,296) |
Total identifiable net assets | 1,303,771 |
Goodwill | 18,795 |
Total net assets acquired | $ | 1,322,566 |
(a) Represents 60% ownership interest in finance lease acquired. See Note 10, “Leases,” for further information on the Company’s leases. 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 fourth quarter of 2019 were primarily related to an increase in the estimated fair values of mineral rights and reserves, which resulted in a decrease to recognized goodwill of approximately $13.0 million. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of Mineral rights and reserves and Goodwill. The fair value of the assets acquired and liabilities assumed were based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The fair value of the mineral reserves of $1,025.9 million was determined using an excess earnings approach, which requires management to estimate future cash flows, net of capital investments in the specific operation. Management’s cash flow projections involved the use of significant estimates and assumptions with respect to the expected production of the mine over the estimated time period, sales prices, shipment volumes, and expected profit margins. The present value of the projected net cash flows represents the preliminary fair value assigned to mineral reserves. The discount rate is a significant assumption used in the valuation model. 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 possible impairment. Goodwill arising from the acquisition consists largely of anticipated synergies and economies of scale from the combined companies and overall strategic importance of the acquired businesses to Albemarle. The goodwill attributable to the acquisition will not be amortizable or deductible for tax purposes.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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