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Recent Transactions
 9 Months Ended
Sep. 30, 2016
Business Combinations [Abstract]  
Recent Transactions
Recent Transactions

Divgi-Warner Private Limited.

In August 2016, the Company sold its 60% ownership interest in Divgi-Warner Private Limited ("Divgi-Warner") to the joint venture partner. This former joint venture was formed in 1995 to develop and manufacture transfer cases and synchronizer rings in India. As a result of the sale, the Company received cash proceeds of approximately $5.4 million, net of capital gains tax and cash divested, which is classified as an investing activity within the Condensed Consolidated Statement of Cash Flows. Furthermore, the Company wrote off noncontrolling interest of $4.8 million as result of the sale and recognized a negligible gain in the three and nine months ended September 30, 2016.

Remy International, Inc.

On November 10, 2015, the Company acquired 100% of the equity interests in Remy for $29.50 per share in cash. The Company also settled approximately $361 million of outstanding debt. Remy was a global market leading producer of rotating electrical components that had key technologies and operations in 10 countries. The cash paid, net of cash acquired, was $1,187.0 million.

The Remy acquisition is expected to strengthen the Company's position in the rapidly developing powertrain electrification trend, with a complementary combination of technologies and global operations. The operating results and assets are reported within the Company's Drivetrain reporting segment as of the date of the acquisition.

The following table summarizes the aggregated estimated fair value of the assets acquired and liabilities assumed on November 10, 2015, the date of acquisition:
(millions of dollars)
 
 
Receivables, net
 
$
222.8

Inventories, net
 
195.3

Property, plant and equipment, net
 
196.6

Goodwill
 
577.5

Other intangible assets, net
 
412.6

Other assets and liabilities
 
(205.1
)
Accounts payable and accrued expenses
 
(170.7
)
Total consideration, net of cash acquired
 
1,229.0

 
 
 
Less: Assumed retirement-related liabilities
 
31.1

Less: Assumed debt
 
10.9

Cash paid, net of cash acquired
 
$
1,187.0



In connection with the acquisition, the Company capitalized $303.3 million for customer relationships, $46.4 million for developed technology, $59.0 million for the Delco Remy, Remy and Maval trade names, $3.8 million for in-process R&D and $0.1 million for leasehold interests. These intangible assets, excluding the indefinite-lived trade names, will be amortized over a period of 5 to 15 years. Various valuation techniques were used to determine the fair value of the intangible assets, with the primary techniques being forms of the income approach, specifically, the relief-from-royalty and excess earnings valuation methods, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under these valuation approaches, the Company is required to make estimates and assumptions about sales, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. Due to the nature of the transaction, goodwill is not deductible for tax purposes.

The Company is in the process of finalizing all purchase accounting adjustments related to the Remy acquisition. The Company has recorded fair value adjustments based on new information obtained during the measurement period primarily related to warranty, inventory, and deferred taxes. These adjustments have resulted in a decrease in goodwill of $7.2 million from the Company's initial estimate. In addition, certain other estimated values for the acquisition, including goodwill, intangible assets and deferred taxes are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis of the fair value at the date of acquisition.

In October 2016, the Company announced that it had entered into a definitive agreement to sell the light vehicle aftermarket business associated with the Company’s November 10, 2015 acquisition of Remy for approximately $80 million in cash. The Remy light vehicle aftermarket business sells remanufactured and new starters, alternators and multi-line products to aftermarket customers, mainly retailers in North America, and warehouse distributors in North America, South America and Europe. The sale of this business will allow the Company to focus on the rapidly developing original equipment manufacturer powertrain electrification trend. The transaction is expected to close in the fourth quarter of 2016 subject to certain customary terms and conditions, antitrust and other regulatory clearances in the United States and abroad.

The Company determined that assets and liabilities subject to the Remy light vehicle aftermarket business sale met the held for sale criteria during the third quarter of 2016. As such, assets of $171.8 million, including allocated goodwill of $21.3 million, and liabilities of $95.3 million were reclassified as held for sale on the Condensed Consolidated Balance Sheets as of September 30, 2016. The fair value of the assets and liabilities, based on the anticipated sale price, was less than the carrying value, therefore, the Company recorded an asset impairment expense of $106.5 million to adjust the net book value of this business to its fair value.

The assets and liabilities of the Remy light vehicle aftermarket business classified as held for sale as of September 30, 2016 are as follows:
(millions of dollars)
 
 
Receivables, net
 
$
71.5

Inventories, net
 
91.2

Property, plant and equipment, net
 
30.5

Goodwill
 
21.3

Other intangible assets, net
 
19.6

Other assets
 
44.2

Impairment of carrying value
 
(106.5
)
Total assets held for sale
 
$
171.8

 
 
 
Accounts payable and accrued expenses
 
$
76.7

Income taxes payable
 
0.2

Long-term debt
 
9.0

Retirement-related liabilities
 
3.6

Other liabilities
 
5.8

Total liabilities held for sale
 
$
95.3



BERU Diesel Start Systems Pvt. Ltd.
    
In January 2015, the Company completed the purchase of the remaining 51% of BERU Diesel by acquiring the shares of its former joint venture partner. The former joint venture was formed in 1996 to develop and manufacture glow plugs in India. After this transaction, the Company owns 100% of the entity. The cash paid, net of cash acquired, was $12.6 million (783.1 million Indian rupees).

The operating results are reported within the Company's Engine reporting segment. The Company paid $12.6 million, which is recorded as an investing activity in the Company's Condensed Consolidated Statement of Cash Flows. As a result of this transaction, the Company recorded a $10.8 million gain on the previously held equity interest in this joint venture. Additionally, the Company acquired assets of $16.0 million, including $11.2 million in definite-lived intangible assets, and assumed liabilities of $4.6 million. The Company also recorded $13.9 million of goodwill, which is non-deductible for tax purposes.