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Business Combinations | 3 Months Ended
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Aug. 31, 2022
Business Combinations | 8. BUSINESS COMBINATIONS The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings. On September 17, 2021, the Company acquired the stock of CAPInnoVet, Inc., a companion animal health business that provides pet medications to the veterinary market. This acquisition provides entry into the retail parasiticide market and enhances the Company’s presence in companion animal markets. Consideration for the purchase was net cash of $17.9 million paid at closing, including $150,000 of cash placed in escrow payable to the former owners in twelve months. There is also the potential for performance milestone payments to the former owners of up to $6.5 million and the Company could incur up to $14.5 million in future royalty payments. The final purchase allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $308,000, inventory of $531,000, prepayments of $296,000, accounts payable of $120,000, other current liabilities of $84,000, non-current liabilities of $6.5 million (contingent consideration accrual calculated using a Monte Carlo simulation utilizing inputs such as probability and timing of milestone achievements, revenue forecasts and volatility, and estimated discount rates relating to established future cash flows of the business), intangible assets of $19.2 million (with an estimated life of 15-20 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. The $150,000 placed in escrow was paid to the former owners on September 21, 2022. The business is operated from our location in Lexington, KY, reporting within the Animal Safety segment. On November 30, 2021, the Company acquired the stock of Delf (U.K.) Ltd., a United Kingdom-based manufacturer and supplier of animal hygiene and industrial cleaning products, and Abbott Analytical Ltd., a related service provider. This acquisition will expand the Company’s line of dairy hygiene products and will enhance our cleaner and disinfectant product portfolio. Consideration for the purchase was net cash of $9.5 million paid at closing, including $722,000 of cash placed in escrow payable to the former owner in one year. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $1,059,000, inventory of $972,000, net property, plant and equipment of $152,000, prepayments of $31,000, accounts payable of $497,000, other current liabilities of $378,000, non-current deferred tax liabilities of $780,000, intangible assets of $3.1 million (with an estimated life of 10-15 years) and the remainder to goodwill (non-deductible for tax purposes). These values are Level 3 fair value measurements. The companies continue to operate from their current location in Liverpool, England, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation. On December 9, 2021, the Company acquired the stock of Genetic Veterinary Sciences, Inc., a companion animal genetic testing business providing genetic information for dogs, cats and birds to animal owners, breeders and veterinarians. This acquisition will further expand the Company’s presence in the companion animal market. Consideration for the purchase was $11.4 million in net cash. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $38,000, net inventory of $292,000, net property, plant and equipment of $399,000, prepayments of $54,000, accounts payable of $325,000, unearned revenue of $1.9 million, other current liabilities of $321,000, intangible assets of $5.5 million (with an estimated life of 5-15 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. The business is operated from its current location in Spokane, Washington, reporting within the Animal Safety segment. On July 1, 2022, Neogen acquired all of the stock of Thai-Neo Biotech Co., Ltd., a longstanding distributor of Neogen’s food safety products to Thailand and Southeast Asia. This acquisition gives Neogen a direct sales presence in Thailand. Consideration for the purchase was $1,558,000 in net cash, with $1,311,000 paid at closing and $234,000 payable on October 1, 2023. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $179,000, inventory of $232,000, net property, plant and equipment of $16,000, other non-current assets of $6,000, accounts payable of $3,000, non-current deferred tax liabilities of $120,000, intangible assets of $ 600,000 (with an estimated life of 5-15 years) and the remainder to goodwill (non-deductible for tax purposes). The business continues to operate in Bangkok, Thailand, reporting within the Food Safety segment. For each completed acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed. 3M Food Safety transaction On September 1, 2022, after the close of the first quarter, Neogen, 3M, and Garden SpinCo, a newly formed subsidiary of 3M created to carve out 3M’s Food Safety business, closed on the transaction which had previously been announced in December 2021, combining 3M’s Food Safety business with Neogen in a Reverse Morris Trust transaction. Immediately following the transaction, Garden SpinCo stockholders own, in the aggregate, approximatel y 50.1% of the issued and outstanding shares of Neogen common stock and pre-merger Neogen shareholders own, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. Garden SpinCo became a subsidiary of Neogen on September 1. On closing, the transaction valued the 3M’s Food Safety business at approximate ly $3.3 billion based on the issuance of 108,269,946 shares of Neogen common stock at a price of $20.90 per share on August 31, 2022 and $1 billion in debt assumed by Neogen post close. 3M’s Food Safety business funded 3M consideration valued at approximat ely $1 billion at close. 3M’s former Food Safety business is a leading provider of food safety testing solutions. It offers a broad range of food safety testing solutions that support multiple industries within food and beverage, helping producers to prevent and protect consumers from foodborne illnesses. The business has a broad global presence with products used in more than 60 countries and a diversified revenue base of more than 100,000 end-user customers. The combination of Neogen and 3M’s Food Safety business creates a leading innovator with an enhanced geographic footprint, innovative product offerings, digitization capabilities, and financial flexibility to capitalize on robust growth trends in sustainability, food safety, and supply chain integrity. This transaction is a business combination and will be accounted for using the acquisition method. The purchase price of 3M’s Food Safety business will be allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. Any excess of the purchase price over the fair value of the net identified assets acquired and liabilities assumed will be recorded as goodwill. Transaction costs related to the transaction will be expensed as incurred. We are currently preparing the valuations and other procedures necessary to determine the purchase price allocation and will record our initial fair value estimates and the results of operations of the acquired business from the acquisition date forward in our condensed consolidated financial statement for the second quarter of fiscal 2023.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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