Acquisitions

12 Months Ended

Dec. 31, 2020

Acquisitions:

On October 31, 2019 (the “Acquisition Closing Date”), we completed the previously announced acquisition of a 60% interest in MRL’s 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; see Note 14, “Long-Term Debt,” for further details. In addition, during the year ended December 31, 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 based on an estimated calculation during the year ended December 31, 2019, was paid during the year ended December 31, 2020 and is included in Change in working capital on the 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 will 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 year ended December 31, 2020 and the period November 1 through December 31, 2019 were losses of approximately $20.1 million and $73.0 million, respectively, attributable to the joint venture. Included in the loss recorded in 2019 was an estimated loss of $64.8 million related to the stamp duties levied on the assets purchased. The adjustment to the final amount of stamp duties levied was recorded, and the full amount was paid, during the year ended December 31, 2020 as noted above. There were no net sales attributable to the joint venture during these periods. 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.

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 $36.3 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 (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	163,662
Mineral rights and reserves	1,046,390
Construction in progress	103,700

Current liabilities	(10,695)
Long-term debt(a)	(55,806)
Other noncurrent liabilities	(28,392)

Total identifiable net assets	1,286,219
Goodwill	36,347
Total net assets acquired	$	1,322,566

(a) Represents finance lease acquired. See Note 18, “Leases,” for further information on the Company’s leases.

The allocation of the purchase price was finalized in the fourth quarter of 2020. There were no significant changes in our purchase price allocation since our initial preliminary estimates reported in the fourth quarter of 2019. The fair value of the assets acquired and liabilities assumed are 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 $1,046.4 million is 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 fair value assigned to mineral reserves. The discount rate is a significant assumption used in the valuation model.

The effect of measurement-period adjustments to the estimated fair values are recognized in the reporting period in which they are determined. The impact of all changes that do not qualify as measurement-period adjustments are 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 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.

Acquisition and integration related costs

Acquisition and integration related costs relate to the acquisition, integration and potential divestitures for various significant projects, including professional services and advisory fees related the acquisition of the Wodgina Project. These costs for the years ended December 31, 2019 and 2018 of $1.0 million and $3.7 million, respectively, were included in Cost of goods sold. Acquisition and integration related costs for the years ended December 31, 2020, 2019 and 2018 of $17.3 million, $19.7 million and $15.7 million were included in Selling, general and administrative expenses, respectively, on our consolidated statements of income