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Acquisitions and Divestitures | 3 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions and Divestitures |
3. Acquisitions and Divestitures
2021 Yanfeng Transaction On March 12, 2021, Adient, Yanfeng Automotive Trim Systems Company Ltd. (“Yanfeng”), Yanfeng Adient Seating Co., Ltd. (“YFAS”), a joint venture owned, directly or indirectly, by Yanfeng (50.01%) and Adient (49.99%), and KEIPER Seating Mechanisms Co., Ltd. (f/k/a Adient Yanfeng Seating Mechanisms Co., Ltd. (“AYM” or "KEIPER"), a joint venture owned, directly or indirectly, by Yanfeng (50%) and Adient (50%), entered into a Master Agreement (the “2021 Agreement”), pursuant to which the parties agreed to, among other things, the following transactions (collectively, the “2021 Yanfeng Transaction”). The 2021 Yanfeng Transaction closed on September 30, 2021 (“Closing Date”). a.Adient transferred all of the issued and outstanding equity interest in YFAS held by Adient, which represents 49.99% of YFAS’s total issued and outstanding equity interest, to Yanfeng pursuant to the Equity Transfer Agreement, dated as of March 12, 2021, by and between Yanfeng and Adient, for CNY ¥8,064 million ($1,210 million), of which ¥3,446 million ($519 million) was paid by Yanfeng to Adient on the Closing Date, and ¥4,618 million ($691 million) was paid by Yanfeng to Adient in December 2021, and; b.YFAS transferred all of the issued and outstanding equity interests in Yanfeng Adient Automotive Components Co., Ltd. ("CQADNT") and Adient (Langfang) Seating Co., Ltd. ("LFADNT") held directly or indirectly by YFAS to Adient for a price of ¥1,754 million ($271 million) (the “YFAS JVs Acquisition”). The YFAS JVs Acquisition was funded, in part, by annual cash dividends from YFAS and KEIPER, paid to shareholders of YFAS and KEIPER; c.YFAS transferred all of the issued and outstanding equity interest in Yanfeng Adient Founder Motor Co., Ltd. (“YFM”) held, directly or indirectly, by YFAS, which represented 70% of YFM’s total issued and outstanding equity interest, to KEIPER for ¥71 million ($11 million) (the “YFM Sale”); d.YFAS transferred all of the issued and outstanding equity interest in Nantong Yanfeng Adient Seating Trim Co., Ltd. (“YFAT”) held, directly or indirectly, by YFAS, which represented 75% of YFAT’s total issued and outstanding equity interest, to KEIPER for ¥113 million ($17 million) (the “YFAT Sale”); e.Adient granted to Yanfeng a license of intellectual property for use on a non-exclusive and perpetual basis for a payment of ¥385 million ($59 million), and Yanfeng/YFAS granted to Adient a royalty-free, non-exclusive and perpetual intellectual property license of the Yanfeng/YFAS intellectual property; and f.YFAS declared and distributed dividends in the amounts and at the times as set forth in the 2021 Agreement to its shareholders (proportionately to their ownership interest, namely 50.01% to Yanfeng and 49.99% to Adient) of approximately ¥4,168 million ($635 million) in the aggregate. YFAS paid an aggregate dividend of ¥2,809 million ($436 million) during the third quarter of fiscal 2021, and ¥1,359 million ($199 million) was distributed on the Closing Date. In addition, on March 12, 2021, Adient, YFAS, Yanfeng and KEIPER, entered into an Ancillary Master Agreement (the “Ancillary Master Agreement”), pursuant to which the parties have agreed to, among other things, the following transactions (collectively, the “Ancillary Transactions”). The Ancillary Transactions were also completed on the Closing Date. a.Adient and Yanfeng amended the KEIPER Equity Joint Venture Contract, dated as of January 31, 2020, as amended, and the Articles of Association of KEIPER, dated as of September 9, 2013, as amended, to, among other things, (i) provide that KEIPER would declare and pay certain annual dividends to KEIPER’s shareholders with respect to each of its 2021 to 2023 fiscal years and (ii) upon closing of the earlier of the YFAT Sales (as defined below) or YFM Sale, because of KEIPER’s ownership of YFAT and YFM, certain amendments relating thereto, including modifying the scope of KEIPER’s business to include the manufacture and sale of automotive seat trim products and micro-motors; and b.KEIPER and Yanfeng and KEIPER and Adient each entered into a long-term supply agreement. In conjunction with the 2021 Yanfeng Transaction, Adient entered into an agreement (the “Boxun Agreement”) with Chongqing Boxun Industrial Co., Ltd. (“Boxun”). Pursuant to such agreement, upon consummation of the YFAS JVs Acquisition, Adient has provided Boxun with the right to sell and, if exercised, Adient has agreed to purchase, all of the issued and outstanding equity interest in CQADNT held by Boxun, which represents 25% of CQADNT’s total issued and outstanding equity interest (the “Boxun Equity Purchase”) for approximately ¥825 million ($124 million), subject to adjustment as set forth in the Boxun Agreement. On October 29, 2021, Boxun exercised its right to sell its equity interest to Adient. In January 2022, Boxun and Adient closed the transaction. The total payment to Boxun from Adient is approximately $200 million ($15 million of historical dividends paid in December 2021, $170 million paid in Jaunary 2022, and $15 million to be paid in the second quarter of fiscal 2022 after completion of the 2021 financial audit). The approximate $200 million payment to Boxun includes the value of the Boxun Equity Purchase along with historical dividends and other payments, of which $194 million had been reflected as redeemable noncontrolling interest at September 30, 2021. At December 31, 2021, Adient reclassifed the redeemable noncontrolling interest balance of $186 million, which is net of $15 million of historical dividends paid in December 2021, to other current liabilities as the obligation was determined to be unconditional. With the acquisitions of Boxun’s 25% and YFAS’s 50% interest of CQADNT, Adient owns 100% of CQADNT effective January 2022. In addition, in conjunction with the 2021 Yanfeng Transaction, Adient entered into agreements, whereby, Adient would: (i) transfer all of the issued and outstanding equity interest in YFAT held, directly or indirectly, by Adient, which represents 25% of YFAT’s total issued and outstanding equity interest, to KEIPER for ¥38 million ($6 million) (the “Adient YFAT Sale” and together with the YFAT Sale, the “YFAT Sales”); (ii) transfer all of the issued and outstanding equity interest in Guangzhou Dongfeng Adient Seating Co., Ltd. (“GZDFAS”) held by Adient, which represents 25% of GZDFAS’s total issued and outstanding equity interest, to YFAS for ¥371 million ($56 million) (the “GZDFAS Sale”) and (iii) transfer all of the issued and outstanding equity interest in Hefei Adient Yunhe Automotive Seating Co., Ltd. (“YHAS”) held by Adient, which represents 10% of YHAS’s total issued and outstanding equity interest, to YFAS for ¥13 million ($2 million) (the “YHAS Sale,” together with the Adient YFAT Sale and GZDFAS Sale, each an “Additional Equity Sale” and collectively, the “Additional Equity Sales”). The Additional Equity Sales were completed on the Closing Date. As a result of the 2021 Agreement, Adient received $41 million in November 2021 representing the remaining balance of proceeds from the sale of its interest in Yanfeng Global Automotive Interior Systems Co. ("YFAI"), a joint venture previously owned, directly or indirectly, by Yanfeng (70%) and Adient (30%), which was part of the 2020 Yanfeng Transaction (as defined and described in Form 10-K for the fiscal year ended September 30, 2021). Upon completion of the 2021 Yanfeng Transaction on September 30, 2021, Adient started consolidating CQADNT and LFADNT. The net purchase consideration of $271 million consisted of net cash consideration of $211 million, net of $60 million acquired. The acquisition was accounted for using the acquisition method, and the operating results and cash flows of CQADNT and LFADNT will be included in Adient's consolidated financial statements starting from October 1, 2021. The acquisitions are expected to provide substantial synergies through vertical integration, purchasing and logistics improvements. The acquisitions also provide for an immediate manufacturing presence in strategic locations in China. Adient recorded a purchase price allocation for the assets acquired and liabilities assumed based on their estimated fair values as of the September 30, 2021 acquisition date. The preliminary purchase price adjustments and allocation is as follows:
|  | Fair value allocation
(in millions) |  | CQADNT |  | LFADNT
Cash |  | $ | 55 |  |  | $ | 5 |
Accounts receivable |  | 296 |  |  | 2 |
Inventory |  | 37 |  |  | 5 |
Property, plant and equipment |  | 86 |  |  | 8 |
Other assets |  | 46 |  |  | 2 |
Goodwill |  | 180 |  |  | 8 |
Intangible assets |  | 234 |  |  | 6 |
Accounts payable |  | (252) |  |  | (19) |
Other liabilities |  | (127) |  |  | (4) |
Subtotal |  | 555 |  |  | 13 |
Less: Interest already owned |  | 103 |  |  | — |
Less: Redeemable noncontrolling interest |  | 194 |  |  | — |
Total purchase consideration |  | 258 |  |  | 13 |
Less: cash acquired |  | 55 |  |  | 5 |
Net cash paid |  | $ | 203 |  |  | $ | 8 |
The values allocated to CQADNT and LFADNT’s intangible assets of $234 million and $6 million, respectively, primarily consisted of customer relationships and patented technologies which are being amortized on a straight line basis over estimated useful lives of 3 to 12 years. The assets were valued using a combination of an income approach and a relief from royalty approach. These values were considered level 3 measurements under the U.S. GAAP fair value hierarchy. Key assumptions used in the valuation of customer relationships included a rate of return of 13.5% and the life of the relationship of approximately 12 years. Key assumptions used in the valuation of patented technologies included a rate of return of 13.5% and the life of the technologies of approximately 10 years. The allocation of the purchase price was based on the valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets along with fair value adjustments on property, plant and equipment and inventory reflected preliminary valuations. SJA On March 31, 2021, Adient sold its 50% equity interest in Shenyang Jinbei Adient Automotive Components Co., Ltd. ("SJA") to the joint venture partner for $58 million, which resulted in a $33 million one-time gain recognized during the second quarter of fiscal 2021. The receivable was recorded as part of other current assets on March 31, 2021, and the net proceeds of $53 million were received on April 1, 2021. Assets held for sale During the first quarter of fiscal 2022, Adient committed to sell certain assets in EMEA. As a result these assets were classified as assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in an impairment charge of $7 million, which was recorded within restructuring and impairment costs on the consolidated statement of income (loss) in the first quarter of fiscal 2022. The impairment was measured using third party sales pricing to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." During fiscal 2021, Adient committed to sell certain assets in France and Turkey. As a result, these assets were classified as assets held for sale (including an allocation of $11 million of goodwill) and were required to be adjusted to the lower of fair value less cost to sell or carrying value. This resulted in Adient recording an impairment charge of $9 million within restructuring and impairment costs on the consolidated statement of income (loss) related to the assets in France. The impairment was measured using third party sales pricing to determine fair values of the assets. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The sale of the assets in France was completed during the third quarter of fiscal 2021 for minimal proceeds while the sale of the assets in Turkey was completed in October 2021 for total expected proceeds of $48 million, of which $36 million was collected at closing.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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