NOTE 4 – ACQUISITIONS

Spectrum Merger

Effective July 13, 2018, subsequent to the fiscal period end date of June 30, 2018 and prior to the issuance of this Quarterly Report, the Company completed the planned Spectrum Merger. Prior to the Spectrum Merger, the Company was a holding company, doing business as HRG and conducting its operations principally through its majority owned subsidiaries.

In accordance with the Agreement and Plan of Merger (the “Merger Agreement”), HRG, through, HRG SPV Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of HRG (“Merger Sub”) merged with and into Spectrum, with Spectrum continuing as a wholly owned subsidiary of HRG. The certificate of incorporation of HRG was amended and restated, pursuant to which, among other things, the corporate name of HRG was changed to “Spectrum Brands Holdings, Inc.”, the Board of Directors of Spectrum were designated as the Board of Directors of the Company with an individual to be designated by Leucadia National Corporation (“Leucadia”) and the officers of Spectrum became officers of the Company. Further, HRG will subsequently operate under the name of Spectrum Brands Holdings, Inc. and the NYSE tick symbol of HRG Common Stock will be “SPB”.

Immediately prior to the close of the Spectrum Merger, each issued and outstanding share of HRG common stock was, by means of a reverse stock split, combined into a fraction of a share of HRG Common Stock equal to (i) the number of shares of common stock, par value $0.01 per share, of Spectrum common stock held by HRG and its subsidiaries, adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200.0 million upward adjustment, divided by (ii) as of immediately prior to the reverse stock split, the number of outstanding shares of HRG common stock on a fully-diluted basis. Each share of Spectrum common stock issued and outstanding (other than shares held in treasury of Spectrum or held by HRG) were converted into the right to receive one share of newly issued HRG common stock and exchanged for HRG common stock. The weighted average shares and earnings per share data on the Condensed Consolidated Statements of Income were retrospectively adjusted to reflect the impact of the reverse stock split for all periods presented. See Note 19 – Earnings Per Share - SBH for further detail on the conversion rate and reverse stock split.

Each restricted stock award, restricted stock unit and performance stock unit granted under an equity plan of Spectrum, whether vested or unvested, were assumed by the Company and automatically converted into a corresponding equity-based award in the Company with the right to hold or acquire shares of common stock equal to the number of shares of Spectrum common stock previously underlying such award. Each new award is subject to the same terms and conditions as the corresponding Spectrum award. The Company will assume all rights and obligations in respect of each equity-based plan of Spectrum.

Prior to the close, each stock option, warrant and restricted stock award granted under an equity-based plan of HRG outstanding and unvested immediately prior to the closing became fully vested and each stock option and warrant became exercisable. Each exercisable award that is unexercised shall be adjusted (including to give effect to the reverse stock split) and shall remain outstanding, subject to the same terms and conditions as applied to the corresponding award. Immediately prior to the reverse stock split, each HRG restricted stock award shall become fully vested and be treated as a share of HRG common stock for purposes of the reverse stock split and the Merger.

The Spectrum Merger will be accounted for as an acquisition of a non-controlling interest under Accounting Standard Codification Topic 810-10 by the Company in the period subsequent to the period end date of June 30, 2018. As previously discussed, the presentation of the Company’s condensed consolidated financial statements and certain notes to the condensed consolidated financial statements for the fiscal period ended June 30, 2018 have been updated to reflect the presentation of Spectrum’s historical financial statements.

During the three and nine month periods ended June 30, 2018, the Company incurred costs of $3.1 million and $22.0 million, respectively, associated with the Spectrum Merger. During the three and nine month periods ended June 30, 2017, the Company incurred costs of $1.4 million and $4.2 million associated with the Spectrum Merger. At the time of close, on July 13, 2018, the Company recognized and paid $29.8 million in transaction fees consisting of contingent financial advisors and investment bankers fees, legal costs, and outstanding compensation and bonus payments.

Acquisition & Integration Costs

The following summarizes acquisition and integration related charges, excluding costs associated with the Spectrum Merger previously discussed, for the three and nine month periods ended June 30, 2018 and 2017:


	Three Month Periods Ended				Nine Month Periods Ended
(in millions)	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
HHI Business	$	0.9	$	1.8	$	5.5	$	5.7
PetMatrix		0.8		1.7		4.5		2.0
Armored AutoGroup		—		0.3		0.6		2.1
Other		0.6		1.4		1.4		1.8
Total acquisition and integration related charges	$	2.3	$	5.2	$	12.0	$	11.6

Acquisition and integration costs include costs directly associated with the completion of the purchase of net assets or equity interest of a business such as a business combination, equity investment, joint venture or purchase of non-controlling interest. Included costs include transactions costs; advisory, legal, accounting, valuation, and other professional fees; and integration of acquired operations onto the Company’s shared service platform and termination of redundant positions and locations.