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ACQUISITIONS AND DIVESTITURES | 6 Months Ended
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Apr. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES Acquisitions Centurion Acquisition The Company completed its acquisition of Centurion Container LLC (“Centurion”) on March 31, 2023 (the “Centurion Acquisition”), which increased the Company’s ownership interest in Centurion from approximately 10% to 80%. Centurion is a leader in the North American IBC reconditioning industry and is involved in IBC rebottling, reconditioning and distribution. The total purchase price for this acquisition, net of cash acquired, was $144.5 million. The fair value of remaining noncontrolling interest of 20% after the acquisition was $40.9 million. Prior to the acquisition, the Company accounted for its approximately 10% ownership interest under the equity method of accounting. The acquisition of a controlling financial interest was accounted for as a step acquisition in accordance with Accounting Standard Codification (“ASC”) 805. As a result, fair value of our previously held interest in Centurion of $16.8 million was valued using a discounted cash flow model, resulting in a gain of $9.8 million. The gain was reflected in the condensed consolidated statements of income within the gain on disposal of businesses, net line. The following table summarizes the consideration transferred to acquire Centurion and the preliminary valuation of identifiable assets acquired and liabilities assumed at the acquisition date:
(in millions) | Amounts Recognized as of the Acquisition Date |  |
Fair value of consideration transferred |  |  |
Cash consideration | $ | 144.5 |  |  |
Noncontrolling interest | 40.9 |  |  |
Previously held interest | 16.8 |  |  |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |
Accounts receivable | $ | 12.4 |  |  |
Inventories | 2.0 |  |  |
Prepaid and other current assets | 0.4 |  |  |
Intangibles | 83.4 |  |  |
Operating lease assets | 10.2 |  |  |
Properties, plants and equipment | 7.7 |  |  |
Total assets acquired | 116.1 |  |  |
Accounts payable | (4.2) |  |  |
Other current liabilities | (4.3) |  |  |
Operating lease liabilities | (10.2) |  |  |
Total liabilities assumed | (18.7) |  |  |
Total identifiable net assets | $ | 97.4 |  |  |
Goodwill | $ | 104.8 |  |  |
The Company recognized goodwill related to this acquisition of $104.8 million. The goodwill recognized in this acquisition was attributable to the acquired assembled workforce, expanded market presence, and enhanced business network, none of which qualify for recognition as a separate intangible asset. Centurion is reported within the Global Industrial Packaging segment to which the goodwill was assigned. The majority of the goodwill is expected to be deductible for tax purposes. The fair value for acquired customer relationship intangibles was determined as of the acquisition date based on estimates and judgments regarding expectations for the future after-tax cash flows arising from the revenue from customer relationships that existed on the acquisition date over their estimated lives, including the probability of expected future contract renewals and revenue, less a contributory assets charge, all of which is discounted to present value. The fair values of the trade name intangible assets were determined utilizing the relief from royalty method, which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade names and discounted to present value using an appropriate discount rate. Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis. The following table summarizes the preliminary purchase price allocation and weighted average remaining useful lives for identifiable intangible assets acquired as of the acquisition date:
(in millions) | Final Purchase Price Allocation | Weighted Average Estimated Useful Life
Customer relationships | $ | 74.7 |  | 12.0
Trademarks | 8.7 |  | 5.0
Total intangible assets | $ | 83.4 |  |
The Company has not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes and contingencies. The Company expects to finalize these amounts within one year of the acquisition date. The estimate of fair value and purchase price allocation were based on information available at the time of closing the acquisition, and the Company continues to evaluate the underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these preliminary estimates are subject to adjustments during the measurement period, not to exceed one year from the date of the acquisition, based upon new information obtained about facts and circumstances that existed as of the date of closing the acquisition. Centurion’s results of operations have been included in the Company’s financial statements for the period subsequent to the acquisition date of March 31, 2023. Centurion contributed net sales of $7.4 million for the three and six months ended April 30, 2023. Lee Container Acquisition The Company completed its acquisition of Lee Container Corporation, Inc. (“Lee Container”) on December 15, 2022 (the “Lee Container Acquisition”). Lee Container is an industry-leading manufacturer of high-performance barrier, conventional blow molded containers, jerrycans and small plastics. The total purchase price for this acquisition, net of cash acquired, was $302.8 million. The Company incurred transaction costs of $5.1 million to complete this acquisition. The following table summarizes the consideration transferred to acquire Lee Container and the preliminary valuation of identifiable assets acquired and liabilities assumed at the acquisition date:
(in millions) | Amounts Recognized as of the Acquisition Date | Measurement Period Adjustments (1) | Amount Recognized as of Acquisition Date (as Adjusted)
Fair value of consideration transferred |  |  |
Cash consideration | $ | 302.8 |  | $ | 0.2 |  | $ | 303.0 |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |
Accounts receivable | $ | 21.9 |  | $ | (0.4) |  | $ | 21.5 |
Inventories | 27.5 |  | (1.0) |  | 26.5 |
Prepaid and other current assets | 0.5 |  | 0.1 |  | 0.6 |
Intangibles | 133.5 |  | — |  | 133.5 |
Finance lease assets | 32.4 |  | 1.0 |  | 33.4 |
Properties, plants and equipment | 54.7 |  | — |  | 54.7 |
Total assets acquired | 270.5 |  | (0.3) |  | 270.2 |
Accounts payable | (3.9) |  | — |  | (3.9) |
Accrued payroll and employee benefits | (1.3) |  | — |  | (1.3) |
Other current liabilities | (3.1) |  | 2.8 |  | (0.3) |
Finance lease liabilities | (30.6) |  | (2.8) |  | (33.4) |
Total liabilities assumed | (38.9) |  | — |  | (38.9) |
Total identifiable net assets | $ | 231.6 |  | (0.3) |  | 231.3 |
Goodwill | $ | 71.2 |  | $ | 0.5 |  | $ | 71.7 |
The Company recognized goodwill related to this acquisition of $71.7 million. The goodwill recognized in this acquisition was attributable to the acquired assembled workforce, expected synergies, and economies of scale, none of which qualify for recognition as a separate intangible asset. Lee Container is reported within the Global Industrial Packaging segment to which the goodwill was assigned. The goodwill is expected to be deductible for tax purposes. The cost approach was used to determine the fair value for building improvements and equipment. The cost approach measures the value by estimating the cost to acquire, or construct, comparable assets and adjusts for age and condition. The Company assigned building improvements a useful life ranging from 1 year to 9 years and equipment a useful life ranging from 1 year to 19 years. Acquired property, plant and equipment are being depreciated over their estimated remaining useful lives on a straight-line basis. The fair value for acquired customer relationship intangibles was determined as of the acquisition date based on estimates and judgments regarding expectations for the future after-tax cash flows arising from the revenue from customer relationships that existed on the acquisition date over their estimated lives, including the probability of expected future contract renewals and revenue, less a contributory assets charge, all of which is discounted to present value. The fair values of the trade name intangible assets were determined utilizing the relief from royalty method, which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade names and discounted to present value using an appropriate discount rate. Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis. The following table summarizes the preliminary purchase price allocation and weighted average remaining useful lives for identifiable intangible assets acquired as of the acquisition date:
(in millions) | Final Purchase Price Allocation | Weighted Average Estimated Useful Life
Customer relationships | $ | 120.0 |  | 15.0
Trademarks | 13.5 |  | 5.0
Total intangible assets | $ | 133.5 |  |
The Company has not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes and contingencies. The Company expects to finalize these amounts within one year of the acquisition date. The estimate of fair value and purchase price allocation were based on information available at the time of closing the acquisition, and the Company continues to evaluate the underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these preliminary estimates are subject to adjustments during the measurement period, not to exceed one year from the acquisition date, based upon new information obtained about facts and circumstances that existed as of the date of closing the acquisition. Lee Container’s results of operations have been included in the Company’s financial statements for the period subsequent to the acquisition date of December 15, 2022. Lee Container contributed net sales of $38.4 million and $56.3 million for the three and six months ended April 30, 2023, respectively. Pro Forma Results The following unaudited supplemental pro forma data presents consolidated information as if the Centurion Acquisition and Lee Container Acquisition had been completed on November 1, 2021. These amounts were calculated after adjusting Centurion’s and Lee Container’s results to reflect interest expense incurred on the debt to finance the acquisitions, additional depreciation and amortization that would have been charged assuming the fair value of property, plant and equipment and intangible assets had been applied from November 1, 2021, the adjusted tax expense, and related transaction costs.
| Three Months Ended April 30, |  | Six Months Ended April 30,
(in millions, except per share amounts) | 2023 |  | 2022 |  | 2023 |  | 2022
Pro forma net sales | $ | 1,326.2 |  |  | $ | 1,738.9 |  |  | $ | 2,637.8 |  |  | $ | 3,363.2 |
Pro forma net income attributable to Greif, Inc. | 113.1 |  |  | 130.6 |  |  | 216.3 |  |  | 140.4 |
Basic earnings per share attributable to Greif, Inc. common shareholders: |  |  |  |  |  |  |
Class A common stock | $ | 1.95 |  |  | $ | 2.19 |  |  | $ | 3.73 |  |  | $ | 2.36 |
Class B common stock | $ | 2.92 |  |  | $ | 3.29 |  |  | $ | 5.58 |  |  | $ | 3.53 |
Diluted earnings per share attributable to Greif, Inc. common shareholders: |  |  |  |  |  |  |
Class A common stock | $ | 1.93 |  |  | $ | 2.18 |  |  | $ | 3.70 |  |  | $ | 2.35 |
Class B common stock | $ | 2.92 |  |  | $ | 3.29 |  |  | $ | 5.58 |  |  | $ | 3.53 |
The unaudited supplemental pro forma financial information is based on the Company’s preliminary assignment of purchase price and therefore subject to adjustment upon finalizing the purchase price assignment. The pro forma data should not be considered indicative of the results that would have occurred if the acquisition and related financing had been consummated on the assumed completion dates, nor are they indicative of future results. Mandatorily Redeemable Noncontrolling Interests At the commencement of the 2023 fiscal year, the terms of the joint venture agreement for one joint venture within the Global Industrial Packaging reportable segment include mandatory redemption by the Company, in cash, of the noncontrolling interest holders’ equity at a formulaic price after the expiration of a lockout period specific to each noncontrolling interest holder. The Company redeemed the 5.2% outstanding equity interest of the noncontrolling interest holder in this joint venture on January 26, 2023 for $3.3 million. Redeemable Noncontrolling Interests At the commencement of the 2023 fiscal year, the terms of the joint venture agreement for one joint venture within the Paper Packing & Services reportable segment include a put option for the noncontrolling interest owners to have the right to put all or a portion of those noncontrolling interests to the Company at a formulaic price after a set period of time. On March 31, 2023, the noncontrolling interest owner exercised their put option for all of their ownership interests. The Company made a payment for $3.6 million to the noncontrolling interest owner for the 20.0% outstanding equity interest. Divestitures Tama Divestiture During the first quarter of 2023, the Company completed its divestiture of a U.S. business in the Paper Packaging & Services segment, Tama Paperboard, LLC (the “Tama Divestiture”), for current net cash proceeds of $100.2 million. The Tama Divestiture did not qualify as discontinued operations as it did not represent a strategic shift that has had a major impact on the Company’s operations or financial results. The Tama Divestiture resulted in a $54.6 million gain on sale of business, including goodwill allocated to the sale of $22.5 million.

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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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