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Note 2 - Acquisitions | 6 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 2) Acquisitions The Company completed three acquisitions in the second quarter of fiscal 2025. At the time of the acquisition and as of December 31, 2024, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors. Amran/Narayan Group On October 28, 2024 (“Closing Date”), the Company acquired, in separate transactions, 100% of the outstanding membership interest in Amran LLC (“Amran”), a privately-held company based in Houston, Texas, pursuant to a Securities Purchase Agreement (the “Amran Purchase Agreement”) and through its wholly owned subsidiary, Mold-Tech Singapore PTE LTD (“Mold-Tech Singapore”), 90.1% of the capital stock of Narayan Powertech Private Limited (“Narayan”), a privately-held India-based company, pursuant to a Securities Purchase Agreement (the “Narayan Purchase Agreement”) (collectively the “Amran/Narayan Group”). With manufacturing locations in the United States and India, Amran/Narayan Group is a leading manufacturer of low voltage and medium voltage instrument transformers. Its custom product portfolio is specifically designed and developed in partnership with OEMs for their specific equipment related to electrical grid applications. This acquisition continues our portfolio strategy of focusing our higher-margin business segments in faster-growing markets. Amran/Narayan Group results are reported within the Company's Electronics segment. Total consideration for Amran aggregated $179.2 million consisting of $153.2 million in cash consideration and 152,299 shares of Standex common stock, issued out of the Company's treasury shares, with a fair value of $26.0 million, subject to customary post-closing adjustments. The fair value of Standex common stock issued as part of the consideration for Amran was determined on the basis of the closing market price of our common shares on the Closing Date. The total consideration for the 90.1% interest in Narayan consisted of a cash payment of $261.6 million, subject to customary closing adjustments. Subject to receipt of regulatory approval from the Reserve Bank of India (“RBI”), Mold-Tech Singapore will acquire the remaining 9.9% of the capital stock of Narayan in a second closing for shares of Standex common stock with a fair value of $26.7 million ("Share Swap Provision"). Additionally, on October 28, 2024, as contemplated by the Narayan Purchase Agreement, the Company, Mold-Tech Singapore and the owners of the remaining 9.9% ownership interest in Narayan, which was not acquired by the Company, entered into a Shareholders’ Agreement. The Shareholders’ Agreement provides the noncontrolling interest holders with certain put rights upon the expiration of the Share Swap Provision. The noncontrolling interest holders will have the right (but not an obligation) to transfer up to their remaining interest in Narayan for a period of three years ("Put Option Period") to Mold-Tech Singapore. Subsequent to the expiration of the Put Option Period, Mold-Tech Singapore will have the right (but not an obligation) to acquire the remaining interest in Narayan for an additional three year consecutive period. The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed and noncontrolling interest based on a valuation of their fair values on the Closing Date. Goodwill recorded from this transaction is attributable to Amran/Narayan Group’s technical and applications expertise, which is highly complementary to the Company's existing business. Identifiable intangible assets of $135.0 million consist primarily of $28.7 million for indefinite lived tradenames and $106.3 million of customer relationships to be amortized over 12 years. The goodwill of $298.9 million created by the transaction is deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best 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 noncontrolling interest in Narayan was determined based on the consideration expected to be transferred by the Company for its controlling ownership interest based on the Standex share price at the Closing Date. The following table summarizes the allocation of the aggregate total consideration for the Amran/Narayan Group to the estimated fair values of the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interest assumed (in thousands):
|  | Preliminary Allocation as of December 31, 2024 |
Fair value of business combination: |  |  |  |
Total cash consideration |  | $ | 414,852 |
Less: cash acquired |  |  | (7,126 | )
Stock consideration |  |  | 25,953 |
Total |  | $ | 433,679 |
Identifiable assets acquired and liabilities assumed: |  |  |  |
Other acquired assets |  | $ | 11,799 |
Accounts receivable |  |  | 27,670 |
Inventories |  |  | 14,017 |
Customer backlog |  |  | 9,500 |
Property, plant, and equipment |  |  | 1,158 |
Identifiable intangible assets |  |  | 135,000 |
Goodwill |  |  | 298,938 |
Deferred tax liabilities, net |  |  | (19,932 | )
Other liabilities assumed |  |  | (17,737 | )
Total identifiable assets acquired and liabilities assumed |  |  | 460,413 |
Redeemable noncontrolling interest (see Note 18) |  |  | (26,734 | )
Total identifiable assets, liabilities and redeemable noncontrolling interest |  | $ | 433,679 |
The initial allocation of the purchase price is based upon a preliminary valuation, and accordingly, our estimates and assumptions are subject to change as we obtain additional information during the measurement period. The Company anticipates finalizing the purchase price allocation within 12 months from the acquisition date. The following table reflects the unaudited pro forma operating results of the Company for the three and six months ended December 31, 2024 and 2023, respectively, which give effect to the acquisition of the Amran/Narayan Group as if it had occurred effective July 1, 2023. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective as of the date indicated, nor are they intended to be indicative of results that may occur in the future. The pro forma information does not include the effects of any synergies related to the Amran/Narayan Group acquisition, transactions between the entities prior to acquisition, or the pre-acquisition impact of other businesses acquired by the Company during this period as they were not material to the Company’s historical results of operations. Pro forma earnings during the periods presented were adjusted to include the following adjustments:
| ● | Amortization of inventory step-up to fair value assuming inventory turns within a two-month period;
| ● | Amortization of definite-lived intangible assets recognized at fair value that exceed one year as if acquired July 1, 2023;
| ● | Non-recurring acquisition-related costs have been excluded from net income;
| ● | Interest expense (including amortization of loan discount) on the Term Loan Credit Agreement entered into in connection with the acquisition as if the loan was obtained July 1, 2023. The interest rate assumed for purposes of the pro forma financial information was 7.7% on average as the rate in agreement is a variable rate plus certain margins; and
| ● | Income tax expense (benefit) was adjusted related to the above pro forma adjustments using an estimated tax rate of 22.6%.
|  | Three Months Ended |  |  | Six Months Ended |
|  | December 31, |  |  | December 31, |
(in thousands) |  |  | 2024 |  |  |  | 2023 |  |  |  | 2024 |  |  |  | 2023 |
Net sales |  | $ | 199,035 |  |  | $ | 201,095 |  |  | $ | 396,721 |  |  | $ | 405,486 |
Net income |  |  | 16,220 |  |  |  | 17,788 |  |  |  | 43,943 |  |  |  | 33,186 |
The Company incurred acquisition-related costs of $11.2 million and $12.8 million, respectively, for the three and six months ended December 31, 2024, which are reported separately in the consolidated statements of operations. From the date of acquisition, the Amran/Narayan Group has contributed $19.5 million of net sales and $0.9 million of net income for the periods ended December 31, 2024. Nascent Technology On November 18, 2024, the Company purchased all of the issued and outstanding equity interests of Nascent Technology Manufacturing, LLC ("Nascent") for $7.6 million, net of cash acquired. Its results are reported in the Electronics segment. The goodwill of $6.5 million created by the transaction is not deductible for income tax purposes. Custom Biogenic Systems On November 13, 2024, the Company purchased all of the issued and outstanding equity interests of Custom Biogenic Systems for $4.4 million, net of cash acquired. Its results are reported within the Company's Scientific segment. Sanyu On February 19, 2024, the Company completed the purchase of all the issued and outstanding equity interests of Sanyu Switch Co., Ltd ("Sanyu"), a privately held company for $20.9 million, net of cash acquired. Sanyu designs and manufactures reed relays for test and measurement and other switching applications. Products include surface mount relays, high current relays, high insulation relays, high density relays for test boards, and RF relays which are used in semi-conductors, other electronics manufacturing and other switching applications. Sanyu's results are reported within the Company's Electronics segment. The Company paid $22.2 million in cash in the third quarter of fiscal year 2024 and recorded $2.5 million as holdback amounts. Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are satisfied and are expected to be settled within 24 months from the date of acquisition. The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Sanyu's technical and applications expertise, which is highly complementary to the Company's existing business. Identifiable intangible assets of $2.9 million consist primarily of $0.7 million for indefinite lived tradenames and $2.2 million for customer relationships to be amortized over 12 years. The goodwill of $9.1 million created by the transaction is not deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The components of the fair value of the Sanyu acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):
| Preliminary Allocation as of March 31, 2024 |  | Adjustments |  | Preliminary Allocation as of December 31, 2024 |
Total purchase consideration: |  |  |  |  |  |  |  |  |
Cash payments | $ | 22,178 |  | $ | - |  | $ | 22,178 |
Holdbacks |  | 2,464 |  |  | - |  |  | 2,464 |
Less cash acquired |  | (3,711 | ) |  | - |  |  | (3,711 | )
Total | $ | 20,931 |  | $ | - |  | $ | 20,931 |
Identifiable assets acquired and liabilities assumed: |  |  |  |  |  |  |  |  |
Other acquired assets | $ | 9,453 |  | $ | (1,462 | ) | $ | 7,991 |
Inventories |  | 5,709 |  |  | (5 | ) |  | 5,704 |
Property, plant, and equipment |  | 4,791 |  |  | (254 | ) |  | 4,537 |
Identifiable intangible assets |  | 2,600 |  |  | 300 |  |  | 2,900 |
Goodwill |  | 6,696 |  |  | 2,404 |  |  | 9,100 |
Liabilities assumed |  | (8,318 | ) |  | (983 | ) |  | (9,301 | )
Total | $ | 20,931 |  | $ | - |  | $ | 20,931 |
Minntronix On July 31, 2023, the Company paid $29.2 million in cash for the purchase of all the issued and outstanding equity interests of Minntronix, a privately held company. Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers, inductors, current sensors, coils, chokes, and filters. The products are used in applications across cable fiber, smart meters, industrial control and lighting, electric vehicles, and home security markets. Minntronix' results are reported within the Company's Electronics segment. The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Minntronix's technical and applications expertise, which is highly complementary to the Company's existing business. Identifiable intangible assets of $10.7 million consist primarily of $3.2 million for indefinite lived tradenames and $7.5 million for customer relationships to be amortized over 15 years. The goodwill of $13.9 million created by the transaction is not deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The components of the fair value of the Minntronix acquisition, including the final allocation of the purchase price are as follows (in thousands):
|  | Final Allocation as of September 30, 2024 |
Fair value of business combination: |  |  |  |
Cash payments |  | $ | 33,890 |
Less, cash acquired |  |  | (4,661 | )
Total |  | $ | 29,229 |
Identifiable assets acquired and liabilities assumed: |  |  |  |
Other acquired assets |  | $ | 8,282 |
Customer backlog |  |  | 1,120 |
Inventories |  |  | 1,780 |
Property, plant, & equipment |  |  | 1,039 |
Identifiable intangible assets |  |  | 10,700 |
Goodwill |  |  | 13,889 |
Liabilities assumed |  |  | (7,581 | )
Total |  | $ | 29,229 |
Acquisition Related Costs Acquisition related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation arrangements and (ii) acquisition related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with integration and acquisition activities, and regulatory matters related to acquired entities. These costs do not include purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets. Acquisition related costs for the three months ended December 31, 2024 and 2023 were $16.4 million and $1.2 million, respectively. Acquisition related costs for the six months ended December 31, 2024 and 2023 were $18.2 million and $1.7 million, respectively.

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