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Acquisitions | 12 Months Ended
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Dec. 30, 2023
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS Gelnex On March 31, 2023, the Company acquired all of the shares of Gelnex, a leading global producer of collagen products (the “Gelnex Acquisition”). The Gelnex Acquisition includes a network of five processing facilities in South America and one in the United States. The initial purchase price of approximately $1.2 billion was comprised of an initial cash payment of approximately $1.1 billion, which consisted of a payment of approximately R$4.3 billion Brazilian real (approximately $855.1 million USD at the exchange rate of R$5.08:USD$1.00 on the closing date) and a payment of approximately $243.5 million in USD, and is subject to various post-closing adjustments in accordance with the stock purchase agreement. In addition, the Company incurred a liability of approximately $104.1 million for acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Gelnex Acquisition gives us immediate capacity to serve the growing needs of our collagen customers and the growing gelatin market. The initial purchase price was financed by borrowing all of the Company’s term A-3 facility of $300.0 million and term A-4 facility of $500.0 million, with the remainder coming through revolver borrowings under the Amended Credit Agreement. During the third and fourth quarters of fiscal 2023, the Company made immaterial working capital adjustments and made a cash payment for working capital purchase price adjustment per the stock purchase agreement of approximately $14.1 million with an offset to goodwill. In addition, the Company obtained new information about facts and circumstances that existed at the acquisition date during the third and fourth quarter of 2023 that resulted in measurement period adjustments to increase property, plant and equipment by approximately $27.7 million, increase intangible assets by approximately $65.0 million, decrease goodwill by approximately $88.6 million, increase deferred tax liabilities by approximately $3.7 million and a decrease in other assets and liabilities of approximately $0.4 million. The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed in the Gelnex Acquisition as of March 31, 2023 (in thousands) inclusive of all measurement period adjustments recorded:
Accounts receivable | $ | 81,025 |
Inventories | 140,865 |
Other current assets | 3,143 |
Property, plant and equipment | 155,493 |
Identifiable intangible assets | 349,000 |
Goodwill | 551,719 |
Operating lease right-of-use assets | 134 |
Other assets | 2,703 |
Deferred tax asset | 993 |
Accounts payable | (15,059) |
Current portion of long-term debt | (44,692) |
Current operating lease liabilities | (26) |
Accrued expenses | (18,719) |
Long-term debt, net of current portion | (1,407) |
Long-term operating lease liabilities | (123) |
Deferred tax liability | (7,803) |
Other noncurrent liabilities | (19) |
Purchase price, net of cash acquired | $ | 1,197,227 |
Less hold-back | 104,145 |
Cash paid for acquisition, net of cash acquired | $ | 1,093,082 |
The $551.7 million of goodwill from the Gelnex Acquisition, which is expected to strengthen the Company’s collagen business and expand its ability to service increased demand of its collagen customer base, is assigned to the Food Ingredients segment. Of the preliminary goodwill booked in the Gelnex Acquisition approximately $435.7 million is expected to be deductible for tax purposes. The identifiable intangible assets include $341.0 million in customer relationships with a weighted average life of 11.4 years and $8.0 million in trade name with a life of 5 years for a total weighted average life of approximately 11.3 years. Due to the complexity of acquiring foreign entities in Brazil and Paraguay, the Company is still assessing the provisional amounts recorded for assets acquired and liabilities assumed including possible future purchase price adjustments to property, plant and equipment, intangible assets and taxes, thus the final determination of the value of assets acquired and liabilities assumed may result in retrospective adjustment to the values presented in the table above with a corresponding adjustment to goodwill. The amount of net sales and net income (loss) from the Gelnex Acquisition included in the Company’s consolidated statement of operations for the year ended December 30, 2023 was $267.1 million and $(26.2) million, respectively. The Company incurred acquisition costs related to the Gelnex Acquisition for the year ended December 30, 2023 of approximately $6.7 million. FASA Group On August 1, 2022, the Company acquired all of the shares of the FASA Group, the largest independent rendering company in Brazil, pursuant to a stock purchase agreement dated May 5, 2022 (the “FASA Acquisition”). The FASA Group, with its 14 rendering plants and an additional two plants under construction, will supplement the Company’s global supply of waste fats, enhancing it as a leader in the supply of low-carbon waste fats and oils. The Company initially paid approximately R$2.9 billion Brazilian Real in cash (approximately $562.6 million USD at the exchange rate in effect on the closing date of the acquisition) for all the shares of the FASA Group, subject to certain post closing adjustments and a contingent payment based on future earnings growth in accordance with the terms set forth in the stock purchase agreement. Under the stock purchase agreement, such contingent payment could range from R$0 to a maximum of R$1.0 billion if future earnings growth reaches certain levels over a three year period. The Company completed an initial analysis as of the acquisition date for this contingency and recorded a liability of approximately R$867.5 million (approximately $168.1 million USD at the exchange rate in effect on the closing date of the acquisition) representing the present value of the maximum contingency under the income approach. The Company will analyze the contingency each quarter and any change will be booked through operating income. As disclosed in Note 1, as a result of the immaterial out-of-period correction identified during the quarter ended July 1, 2023, utilizing assistance from external valuation experts and the use of a Monte Carlo model, the Company determined the acquisition date fair value of the contingent consideration was R$428.2 million (approximately $83.0 million USD at the exchange rate in effect on the closing date of the acquisition) representing the probability weighted present value of the expected payment to be made under the agreement using the income approach, resulting in an overstatement of the fair value of the contingent consideration liability of approximately $85.1 million. The immaterial out-of-period correction reduced the acquisition date fair value of contingent consideration liability and goodwill associated with the FASA Acquisition by approximately $85.1 million during the quarter ended July 1, 2023. The Company will analyze the contingent consideration liability using a Monte Carlo model each quarter and any change in fair value will be recorded through operating income as changes in fair value of contingent consideration including the accretion of the change in the long-term liability. The hold-back and contingent consideration amounts represent noncash investing activities during the period of acquisition. The Company initially financed the FASA Acquisition by borrowing approximately $515.0 million of revolver borrowings under the Amended Credit Agreement, with the remainder coming from cash on hand. During the fourth quarter of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for a working capital purchase price adjustment per the stock purchase agreement of approximately $7.1 million with an offset to goodwill. The Company obtained new information about facts and circumstances that existed at the acquisition date during the first and second quarter of 2023 that resulted in measurement period adjustments to increase property, plant and equipment by approximately $81.5 million, decrease intangible assets by approximately $41.7 million, decrease goodwill by approximately $21.5 million, increase deferred tax liabilities by approximately $16.0 million and increase other assets and liabilities by approximately $2.3 million, with the net impact of the adjustments to the consolidated statement of operations being immaterial. The following table summarizes the final fair value of the assets acquired and the liabilities (in thousands), assumed in the FASA Acquisition as of August 1, 2022 at the exchange rate of R$5.16:USD$1.00 as adjusted for the immaterial out of period correction disclosed in Note 1 (16) and inclusive of all measurement adjustments recorded:
Accounts receivable | $ | 76,640 |
Inventories | 43,058 |
Other current assets | 33,327 |
Property, plant and equipment | 224,384 |
Identifiable intangible assets | 119,477 |
Goodwill | 301,937 |
Operating lease right-of-use assets | 583 |
Other assets | 62,388 |
Deferred tax asset | 2,315 |
Accounts payable | (15,920) |
Current portion of long-term debt | (18,680) |
Accrued expenses | (38,708) |
Long-term debt, net of current portion | (41,926) |
Long-term operating lease liabilities | (583) |
Deferred tax liability | (95,653) |
Other noncurrent liabilities | (503) |
Non-controlling interests | (21,704) |
Purchase price, net of cash acquired | $ | 630,432 |
Less hold-back | 21,705 |
Less contingent consideration (1) | 82,984 |
Cash paid for acquisition, net of cash acquired | $ | 525,743 |
(1) As disclosed in Note 1 (16), the immaterial out-of-period correction made during the quarter ended July 1, 2023 resulted in a reduction of goodwill and contingent consideration liability recorded associated with the FASA Acquisition of approximately $85.1 million. The $301.9 million of goodwill from the FASA Acquisition, which is expected to strengthen the Company’s base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment and is nondeductible for tax purposes. The identifiable intangible assets include $108.6 million in collection routes with a life of 12 years and $10.9 million in trade name with a life of 5 years for a total weighted average life of approximately 11.4 years. The amount of net sales and net income from the FASA Acquisition included in the Company’s consolidated statement of operations for the twelve months ended December 30, 2023 were $362.7 million and $3.5 million, respectively. Valley Proteins On May 2, 2022, the Company acquired all of the shares of Valley Proteins, pursuant to a stock purchase agreement dated December 28, 2021 (the “Valley Acquisition”). The Valley Acquisition includes a network of 18 major rendering plants and used cooking oil facilities throughout the southern, southeast and mid-Atlantic regions of the U.S. The Company initially paid approximately $1.177 billion in cash for the Valley Acquisition, which was subject to various post-closing adjustments in accordance with the stock purchase agreement. During the third and fourth quarters of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for a working capital purchase price adjustment per the stock purchase agreement of approximately $6.0 million with an offset to goodwill. The Company initially financed the Valley Acquisition by borrowing all of the Company’s delayed draw term A-1 facility of $400.0 million and delayed draw term A-2 facility of $500.0 million, with the remainder coming through revolver borrowings under the Amended Credit Agreement. The following table summarizes the final fair value of the assets acquired and the liabilities assumed in the Valley Acquisition as of May 2, 2022 (in thousands) inclusive of all measurement period adjustments recorded:
Accounts receivable | $ | 68,558 |
Inventories | 58,246 |
Other current assets | 13,825 |
Property, plant and equipment | 409,405 |
Identifiable intangible assets | 389,200 |
Goodwill | 358,298 |
Operating lease right-of-use assets | 16,380 |
Other assets | 14,164 |
Deferred tax asset | 1,075 |
Accounts payable | (47,615) |
Current portion of long-term debt | (2,043) |
Current operating lease liabilities | (4,779) |
Accrued expenses | (66,034) |
Long-term debt, net of current portion | (5,995) |
Long-term operating lease liabilities | (11,601) |
Other noncurrent liabilities | (19,436) |
Purchase price, net of cash acquired | $ | 1,171,648 |
The $358.3 million of goodwill from the Valley Acquisition, which is expected to strengthen the Company’s base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment. For U.S. income tax purposes, the Valley Acquisition is treated as a purchase of substantially all the assets of Valley Proteins; therefore, almost all of the goodwill is expected to be deductible for tax purposes. The identifiable intangible assets include $292.1 million in collection routes with a life of 15 years and $97.1 million in permits with a life of 15 years for a total weighted average life of approximately 15 years. The amount of net sales and net income from the Valley Acquisition included in the Company’s consolidated statement of operations for the twelve months ended December 30, 2023 were $780.9 million and $9.0 million, respectively. As a result of the Gelnex Acquisition, the FASA Acquisition and the Valley Acquisition, effective March 31, 2023, August 1, 2022 and May 2, 2022, respectively, the Company began including the operations of the Gelnex Acquisition, the FASA Acquisition and the Valley Acquisition in the Company’s consolidated financial statements. The following table presents selected pro forma information, for comparative purposes, assuming the Gelnex Acquisition, the Valley Acquisition and FASA Acquisition had occurred on January 3, 2021 for the periods presented (unaudited) (in thousands):
| Twelve Months Ended
| December 30, 2023 |  | December 31, 2022 |  | January 1, 2022
Net sales | 6,886,347 |  |  | 7,469,216 |  |  | $ | 6,097,742 |
Net income | 663,284 |  |  | 739,966 |  |  | 621,320 |
The Company notes that pro forma results of operations for the acquisitions discussed below have not been presented because the effect of each acquisition individually or in the aggregate is not deemed material to revenues, total assets and net income of the Company for any period presented. On February 25, 2022, a wholly-owned international subsidiary of the Company acquired all of the shares of Group Op de Beeck, a Belgium digester, organic and industrial waste processing company, that is now included in our Fuel Ingredients segment, for an initially estimated purchase price of approximately $91.7 million, plus or minus various closing adjustments in accordance with the stock purchase agreement. Initially, the Company paid approximately $71.3 million in cash consideration. In the second quarter of fiscal 2022, the Company paid an additional $4.2 million for purchase price adjustments related to working capital and estimated future construction costs for a total purchase price of approximately $75.5 million. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $28.1 million, intangible assets of approximately $27.2 million, goodwill of approximately $29.6 million and other net liabilities of approximately $(9.4) million including working capital and net debt. The identifiable intangibles have a weighted average life of 15 years. The Company incurred acquisition and integration costs of approximately $13.9 million and $16.4 million for the twelve months ended December 30, 2023 and December 31, 2022, respectively, primarily related to the above disclosed acquisitions, including the Gelnex Acquisition, the Valley Acquisition, the FASA Acquisition, Group Op de Beeck, and the January 31, 2024 Miropasz acquisition disclosed below. Additionally, the Company made other immaterial acquisitions in fiscal 2022. On January 31, 2024, the Company announced that it has completed the acquisition of Polish rendering company, Miropasz Group, for approximately €110.0 million (approximately $119.0 million USD at the exchange rate in effect on the closing date of the acquisition) plus or minus post-closing adjustments. The Miropasz Group includes three poultry rendering plants in southeast Poland and was assigned to the Feed Ingredients segment.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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