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Acquisitions

9 Months Ended

Sep. 30, 2020

3. Acquisitions

On July 1, 2020, the Company completed its acquisition of PureCircle Limited (“PureCircle”) through its wholly owned subsidiary Ingredion SRSS Holdings Limited (“Ingredion SRSS”), an unlisted United Kingdom private limited company. PureCircle is one of the leading producers and innovators of stevia sweeteners for global food and beverage industries. To complete the closing, the Company made a total cash payment of $208 million, net of $14 million of cash acquired, which it funded from cash on hand. Upon the closing, PureCircle is wholly owned by Ingredion SRSS, which in turn is 75%-owned by Ingredion and 25%-owned by former PureCircle shareholders. PureCircle is consolidated by Ingredion for financial reporting purposes, with a corresponding redeemable non-controlling interest of $74 million recorded for the portion not owned by the Company. The results of PureCircle will be reported on a one-month lag within the Company’s consolidated financial statements during the integration process of the companies. The results of the acquired operations are included in the Company’s consolidated results from the acquisition date within the Asia-Pacific reportable segment. Pro-forma results of operations for the acquisition have not been presented as the effect of the acquisition would not be material to the Company’s results of operations for any periods presented.

A preliminary allocation of the purchase price to the assets acquired and liabilities assumed was made based on available information and incorporating management’s best estimates. The assets acquired and liabilities assumed in the transaction are generally recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred. Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired. The goodwill related to PureCircle is not tax-deductible due to the structure of the acquisition.

The following table summarizes the preliminary purchase price allocations for the PureCircle acquisition as of September 30, 2020:


		Preliminary
(in millions)		PureCircle
Working capital (excluding cash)	$	77
Property, plant and equipment		89
Other, net		4
Identifiable intangible assets		64
Goodwill		48
Total purchase price, net of cash	$	282

All of the recorded assets and liabilities, including working capital, property, plant and equipment, goodwill, intangibles and taxes, are open to change as the Company is still in process of performing purchase accounting for PureCircle, pending receipt of certain information required to finalize the determination of fair value. The goodwill results from synergies and other operational benefits expected to be derived from the acquisition.

The identifiable intangible assets for the acquisition of PureCircle include items such as customer relationships, trade names, and proprietary technology. The fair values of these intangible assets were determined to be Level 3 under the fair value hierarchy. Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for fair value estimates to be made in situations in which there is little, if any, market activity for an asset or liability at the measurement date. For more information on the fair value hierarchy, see Note 6.

On March 1, 2019, the Company completed its acquisition of Western Polymer LLC (“Western Polymer”), a privately-held, U.S.-based company headquartered in Moses Lake, Washington, that produces native and modified potato starches for industrial and food applications for $42 million, net of cash acquired of $4 million. The acquisition expanded the Company's potato starch manufacturing capacity, enhanced its processing capabilities, and broadened its higher-value specialty ingredients business and customer base. The results of the acquired operation are included in the Company’s consolidated results from the acquisition date within the North America business segment. During the three months ended March 31, 2020, the Company finalized the purchase price allocation for the Western Polymer acquisition. The finalization of goodwill and intangible assets did not have a significant impact on previously estimated amounts. The acquisition of Western Polymer added $13 million of goodwill and intangible assets and $29 million of net tangible assets as of the acquisition date. Pro-forma results of operations for the acquisition made in 2019 have not been presented as the effect of the acquisition would not be material to the Company’s results of operations for any periods presented.

The Company incurred $5 million and $8 million of pre-tax acquisition and integration costs for the three and nine months ended September 30, 2020, respectively, associated with the PureCircle acquisition. The Company incurred an insignificant amount of pre-tax acquisition and integration costs for the three months ended September 30, 2019 and $2 million of pre-tax acquisition and integration costs for the nine months ended September 30, 2019 associated with the Western Polymer acquisition.