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Acquisition

6 Months Ended

Dec. 31, 2024

Acquisition

3. Acquisition

On October 31, 2024, the Company completed its acquisition of the medicated feed additives portfolio, certain water-soluble products and related assets from Zoetis, Inc (the “Acquisition"). The Acquisition was accounted for as a business combination under the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The determination of estimated fair value requires management to make significant estimates and assumptions. The results of operations of the Acquisition are included in our consolidated statements of operations from the date of acquisition and reported within the Animal Health segment.

The Acquisition has expanded our medicated feed additives and water-soluble products category, advanced our planned existing product portfolio enhancement and diversified our species and product offerings, which complements our commercial operations and international infrastructure while expanding our global presence.

The preliminary purchase price for the Acquisition was approximately $301.8 million ($290.8 million net of cash acquired), which was funded by Delayed Draw Term A-1 Loans and Delayed Draw Term A-2 Loans drawn on 2024 Credit Facilities (each as defined below in Note 6). The purchase and sale agreement underlying the transaction provides for closing working capital and other adjustments to be completed after the Acquisition. These adjustments, which are expected to be completed in our fourth fiscal quarter, have yet to be finalized and could materially change the purchase price consideration of the Acquisition.

For the three and six months ended December 31, 2024, we recognized transaction costs related to the Acquisition of $8.8 million and $12.2 million, respectively. These costs were primarily associated with financial advisory, legal and other professional services related to the Acquisition and are reflected within selling, general and administrative expenses in our consolidated statements of operations.

The amount of revenue attributable to the Acquisition included in consolidated statements of operations for the three and six months ended December 31, 2024 is $36.7 million. Based on our current operational structure and the nature and mix of legal entities and assets acquired, we will not be able to complete a full cost identification and allocation assessment for activities related to the Acquisition. As a result, we are unable to accurately determine earnings or loss attributable to the Acquisition since the date of acquisition.

The following table summarizes the preliminary allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed at the date of the Acquisition.


		At October 31,
		2024
Assets acquired:
Cash and cash equivalents		$	11,018
Accounts receivable, net			350
Inventories, net			149,316
Property, plant and equipment, net			139,603
Other assets ⁽¹⁾			24,048
Total preliminary fair value of assets acquired			324,335
Liabilities assumed:
Accounts payable			1,411
Accrued expenses and other current liabilities			14,395
Other noncurrent liabilities			6,686
Total preliminary fair value of liabilities assumed			22,492
Preliminary fair value of net assets acquired			301,843
Preliminary purchase price consideration transferred ⁽²⁾		$	301,843

(1)	Includes current and noncurrent amounts.

(2)

The preliminary purchase price consideration excludes amounts related to the settlement of the final purchase price subsequent to December 31, 2024, as disclosed above. Any increase or decrease in the fair value of the net assets acquired, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to the acquired assets and assumed liabilities and could impact the operating results of the combined company following the Acquisition due to differences in the allocation of the purchase consideration and changes in the depreciation and amortization related to some of these assets and liabilities.

In the table above, the estimate of fair value of inventories, net was determined using the replacement cost method, which contemplates the costs to complete the manufacturing and sales process, a reasonable profit allowance from the sales process, and estimated holding costs. The cost basis of raw materials was determined to represent current replacement cost and therefore approximates fair value. The net fair value step-up adjustment to inventories of $5.3 million is being amortized to cost of sales as the inventory is sold to customers. The calculated value of the estimated step-up for inventory is preliminary, as management’s valuation of the acquisition and its allocation of the purchase price consideration are still in progress, and there are net working capital adjustments and in-transit inventory transactions that have yet to be finalized. Accordingly, the inventory, net step-up is subject to change and could vary materially from the final purchase price allocation.

Property, plant and equipment, net is composed of land, buildings, equipment (including machinery, furniture and fixtures, and computer equipment), and construction-in-progress. The estimate of fair value of property, plant and equipment, net was determined by the direct cost, indirect cost and/or market approaches, as applicable, depending on the nature of the asset. The preliminary step-up adjustment of $37.2 million will be depreciated on a straight-line basis over the remaining useful life of the respective assets, which ranges from 3 years to 23 years. The calculated value of the estimated step-up for property, plant and equipment, net acquired is preliminary, as management’s valuation of the acquisition and its allocation of the purchase price consideration are still in progress. Accordingly, this step-up is subject to change, and the final purchase price allocation may result in a different allocation for property, plant and equipment, net, as well as a difference in the remaining average useful life from what is presented in this paragraph.

Pro Forma Results

The following unaudited pro forma financial information presents the combined results of net sales and operating income of the Company as if the Acquisition had occurred as of the beginning of the years presented and does not include any material non-recurring adjustments. The unaudited pro forma financial information is not necessarily indicative of what the Company’s net sales and operating income actually would have been had the Acquisition occurred at the beginning of each year presented. In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined company. The pro forma information does not include any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the Acquisition.


		Three Months						Six Months
For the Periods Ended December 31		2024			2023			2024			2023
Net sales		$	348,944		$	359,605		$	720,050		$	688,811
Operating income			36,605			30,721			86,630			40,524