The condensed consolidated statements of income (loss) 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 all of 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. 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. Upon revaluation of the contingent liability at February 28, 2023, the Company recognized a gain of $300,000 on the performance milestone liability, recorded within other income. The business is operated from our location in Lexington, KY, reporting within the Animal Safety segment.

On November 30, 2021, the Company acquired all of 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 expanded 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. 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 all of 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 $11.3 million in net cash. The business is operated from its current location in Spokane, Washington, reporting within the Animal Safety segment. Since completion of initial estimates in the second quarter of fiscal year 2022, the Company has recorded insignificant measurement period adjustments, which resulted in a decrease to the base purchase price.

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 $1,581,000 in net cash, with $1,310,000 paid at closing, $37,000 paid on November 29, 2022 as a working capital adjustment and $234,000 payable on October 1, 2023. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $177,000, inventory of $232,000, prepaids of $3,000, net property, plant and equipment of $16,000, other non-current assets of $6,000, accounts payable of $98,000, other payables of $6,000, non-current tax liabilities of $124,000, intangible assets of $620,000 (with an estimated life of 10 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.

On February 10, 2023, Neogen acquired certain assets as part of an asset purchase agreement with Corvium, Inc., a partner and supplier within the Company's software analytics platform. This acquisition, which primarily includes the software technology, advances the Company's food safety data analytics strategy. The purchase price consideration was $24.1 million, which included certain amounts for litigation and indemnity escrow. There is also the potential for performance milestone payments based on the successful implementation of the software service at customer sites and sale of licenses. As a result, the Company has recorded contingent liabilities as part of the opening balance sheet within Other accruals and Other non-current liabilities, as shown below. As of February 28, 2023, the Company has recorded a preliminary allocation of the purchase consideration to assets acquired and liabilities assumed based on initial fair value estimates and is subject to continuing management analysis, with assistance from third party valuation advisors. Goodwill, which is fully deductible for tax purposes, includes value associated with profits earned from data management solutions that can be offered to existing customers and the expertise and reputation of the assembled workforce and developed software technology. These values are Level 3 fair value measurements. The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations prior to receiving a third-party assessment, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.

Due to the Company's acquisition of Corvium, Inc., it recorded a loss of $1.5 million in the third quarter on dissolution of its minority interest in that company.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:


(in thousands)
Prepaids and other current assets	$	101
Property, plant and equipment		13
Intangible assets		14,000
Deferred revenue		(1,827	)
Other accruals		(1,000	)
Adjustment of annual license prepaid		(419	)
Other non-current liabilities		(1,000	)
Total identifiable assets and liabilities acquired		9,868
Goodwill		14,199
Total purchase consideration	$	24,067

For each completed acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed.

On September 1, 2022, Neogen, 3M Company (“3M”), and Garden SpinCo Corporation (“Garden SpinCo”), a newly formed, wholly owned subsidiary of 3M created to carve out 3M’s Food Safety Division (“3M FSD”, “FSD”), closed on the transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and Garden SpinCo became a wholly owned subsidiary of Neogen (“FSD transaction”). Following the FSD transaction, pre-merger Garden SpinCo stockholders own, in the aggregate, approximately 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. This transaction is a business combination and was accounted for using the acquisition method.

The acquired business is a leading provider of food safety testing solutions. It offers a broad range of food safety testing products 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 the 3M FSD 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. The acquired Food Safety business continues to primarily operate in facilities in Minnesota and the United Kingdom, and is being managed overall in Michigan, reporting within the Food Safety segment.

The purchase price consideration for the 3M FSD was $3.2 billion, net of customary purchase price adjustments and transaction costs, which consisted of 108,269,946 shares of Neogen common stock issued on closing with a fair value of $2.2 billion and cash consideration of $1 billion, funded by the additional financing secured by the Company. See Note 10 for further detail on the debt incurred.

During the three months ended February 28, 2023, the Company recorded adjustments to its preliminary allocation of the purchase consideration to assets acquired and liabilities assumed based on initial fair value estimates and is subject to continuing management analysis, with assistance from third party valuation advisors. In the third quarter of fiscal 2023, net working capital adjustments resulted in changes to the inventories acquired and valuations of property, plant and equipment resulted in recognizing the fair value of assets acquired. The excess of the purchase price over the fair value of the net tangible assets and identifiable intangible assets of $1.98 billion was recorded as goodwill, of which $1.92 billion is not deductible for tax purposes. Goodwill, which increased in the third quarter of fiscal 2023 based on an updated purchase consideration, includes value associated with profits earned from market and expansion capabilities, expected synergies from integration and streamlining operational activities, the expertise and reputation of the assembled workforce and other intangible assets that do not qualify for separate recognition. These values are Level 3 fair value measurements.

The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of inventories and property, plant and equipment, as well as deferred income tax liabilities. The fair values of the assets acquired and liabilities assumed are based on our preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While we believe that these preliminary estimates provide a reasonable basis for estimating the fair value of the assets acquired and liabilities assumed, we will continue to evaluate available information prior to finalization of the amounts.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:


(in thousands)
Cash and cash equivalents	$	319
Inventories		18,403
Other current assets		14,855
Property, plant and equipment		25,721
Intangible assets		1,560,000
Right of use asset		882
Lease liability		(885	)
Deferred tax liabilities		(355,347	)
Other liabilities		(3,585	)
Total identifiable assets and liabilities acquired		1,260,363
Goodwill		1,978,149
Total purchase consideration	$	3,238,512

The following table summarizes the intangible assets acquired and the useful life of these assets.


(in thousands)	Fair Value		Useful Life in Years
Trade Names and Trademarks	$	110,000		25
Developed Technology		280,000		15
Customer Relationships		1,170,000		20
Total intangible assets acquired	$	1,560,000

During the three and nine months ended February 28, 2023, transaction fees and integration expenses of $2.8 million and $55.6 million, respectively, were expensed. In the three and nine months ended February 28, 2022, acquisition related costs of $10.6 million and $19.9 million were expensed, respectively. These costs are included in general and administrative expenses in the Company’s condensed consolidated statements of income (loss).

The operating results of the FSD have been included in the Company’s condensed consolidated statements of income (loss) since the acquisition date. In the third quarter of fiscal 2023, the FSD’s total revenue was $87.0 million and operating income was approximately $3.3 million. The operating income includes $2.8 million of transaction fees and integration expenses, $20.3 million of amortization expense for acquired intangible assets and a $614,000 credit to cost of goods sold related to an adjustment to the step up to fair value on acquired inventory.

The following table presents pro forma information as if the merger with the 3M FSD business had occurred on June 1, 2021 and had been combined with the results reported in our condensed consolidated statements of income (loss) for all periods presented:


	Three Months Ended February 28,					Nine Months Ended February 28,
(in thousands, unaudited)	2023		2022			2023			2022
Net sales	$	218,300	$	219,900		$	675,600		$	668,100
Operating Income (loss)	$	15,700	$	(17,000	)	$	(5,400	)	$	(10,900	)

The unaudited pro forma information is presented for informational purposes only and is not indicative of the results that would have been achieved if the merger had taken place at such time. The unaudited pro forma information presented above includes adjustments primarily for amortization charges for acquired intangible assets and certain acquisition-related expenses for legal and professional fees.

In connection with the acquisition of the 3M FSD, the Company and 3M entered into several transition service agreements, including manufacturing, distribution and certain back-office support, that have been accounted for separately from the acquisition of assets and assumption of liabilities in the business combination. 3M periodically remits amounts charged to customers on our behalf and charges us for the associated cost of goods sold and transition service fees. As of February 28, 2023, a net receivable from 3M of $42.9 million was included in prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets.