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Acquisitions | 9 Months Ended
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Sep. 30, 2021
Business Combinations [Abstract] |
Acquisitions |
17. | ACQUISITIONS
2021 Acquisitions INVISTA Acquisition On January 29, 2021, the Company and its wholly-owned subsidiaries Stepan Holdings Netherlands B.V. and Stepan UK Limited (collectively, “Stepan”) entered into a Stock and Asset Purchase Agreement with Arteva Specialties B.V., INV Performance Surfaces, LLC, INVISTA Textiles (U.K.) Limited, INV Management Services, LLC, and INVISTA Equities, LLC (collectively, “INVISTA”) to acquire INVISTA's aromatic polyester polyol business and associated assets. Included in the transaction were two manufacturing sites, one in Wilmington, North Carolina (U.S.) and the other in Vlissingen, Netherlands, along with intellectual property, customer relationships, inventory and working capital. This acquisition expands the Company’s manufacturing capabilities in both the United States and Europe and enhances its business continuity capabilities for the market. The Company believes that INVISTA’s available spare capacity, combined with debottlenecking opportunities for both plants, will allow Stepan to support future market growth in a capital efficient way. The purchase price was $165,000,000, plus $21,560,000 of working capital and $3,000,000 of associated value-added taxes (VAT), and was paid in cash. Immaterial working capital adjustments were finalized and paid during the second quarter of 2021. The working capital acquired included $5,900,000 of cash. The acquisition has been accounted for as a business combination, and the acquired operations are included in the Company’s Polymer segment in the first nine months of 2021. The assets acquired and liabilities assumed as part of the acquisition were measured and recorded at estimated fair value. The principle valuation techniques employed include cost and market approaches (PP&E), relief from royalty method under the income approach (trade name and technology/know-how) and multi-period excess earnings method under the income approach (customer relationships). The Company finalized the purchase price allocation during the third quarter of 2021. The following table summarizes the purchase price allocation for the major components of the acquisition:
(In thousands) |  |  |  |
Assets: |  |  |  |
Property, plant and equipment |  | $ | 54,200 |
Identifiable intangibles assets |  |  | 46,000 |
Goodwill |  |  | 64,800 |
Total assets acquired |  | $ | 165,000 |
The acquired goodwill includes proprietary and intellectual property, brand recognition, business continuity benefits and marketing, manufacturing and supply chain synergies of the new business with the Company’s existing Polymer business. The acquired goodwill has been assigned to the Polymers segment and is deductible for tax purposes. Identifiable intangible assets included technology and manufacturing know-how ($13,000,000), trademarks ($8,000,000) and customer relationships ($25,000,000). The amortization periods for know-how and trademarks have been estimated to be in the range of 7 to 8 years. The amortization period for customer relationships has been estimated to be in the range of 12 to 14 years. As of September 30, 2021, in addition to the purchase price, the Company also paid $4,025,000 of acquisition-related expenses that primarily included legal, consulting, valuation and accounting services. For the three and nine months ended September 30, 2021, the Company incurred $474,000 and $2,078,000 of acquisition-related expenses, respectively. These costs were included in the Administrative expenses line in the Company’s condensed consolidated statement of income. The following table reflects pro forma financial information prepared under the assumption that the acquisition of the INVISTA aromatic polyester polyol business occurred on January 1, 2020. Pro Forma Financial Information Unaudited
|  | Three Months Ended September 30 |  |  | Nine Months Ended September 30 |
(In thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net Sales |  | $ | 602,688 |  |  | $ | 491,480 |  |  | $ | 1,748,378 |  |  | $ | 1,448,316 |
Net Income Attributable to Stepan Company |  | $ | 37,299 |  |  | $ | 36,105 |  |  | $ | 123,931 |  |  | $ | 99,430 |
The supplemental pro forma information is presented for illustrative purposes only and may not be indicative of the consolidated results that would have been achieved by the Company had the acquisition occurred on January 1, 2020. Furthermore, future results may vary materially from the results reflected in the pro forma information. The pro forma results include adjustments primarily related to amortization of acquired intangible assets, depreciation of the fair value adjustment related to acquired plant assets, tax expense and management assumptions related to INVISTA’s legacy carved-out financial statements. In addition, non-recurring adjustments to pro forma net income include $2,078,000 of acquisition-related expenses. Such expenses were excluded from 2021 pro forma net income and included in 2020 pro forma net income. Fermentation Plant Acquisition On February 2, 2021, the Company acquired a fermentation plant, located in Lake Providence, Louisiana (U.S.). The Company believes this plant complements the rhamnolipid-based bio-surfactant technology the Company acquired from Logos Technologies in March 2020. Fermentation is a new platform technology for the Company and the Company is focusing efforts to further develop, integrate, produce and commercialize these unique surfactants moving forward. Bio-surfactants, produced via fermentation, are attractive due to their biodegradability, low toxicity, and in some cases, unique antimicrobial properties. These bio-surfactants offer synergies in several strategic end use markets including oilfield, agriculture, personal care and household, industrial and institutional. The acquisition of this industrial scale fermentation plant represents the latest step in the Company’s bio-surfactant commercialization efforts. The purchase price was $3,500,000 and was paid in cash. This acquisition has been accounted for as an asset acquisition. 2020 Acquisitions Clariant (Mexico) Acquisition On September 17, 2020, the Company, through its subsidiaries in Mexico, acquired Clariant (Mexico) S.A. de C.V.’s (Clariant) anionic business located in Santa Clara, Mexico. The acquisition did not include the purchase of a manufacturing site. The business acquired was integrated into the Company’s two existing manufacturing sites in Mexico (Matamoros and Ecatepec). The purchase price of the acquisition was $14,000,000, plus associated value-added taxes (VAT). As of September 30, 2021, $14,308,000, inclusive of $308,000 net VAT, had been paid with cash on hand. The acquisition was accounted for as a business combination and the assets were measured and recorded at their estimated fair value. The acquired goodwill is not tax deductible. All assets acquired are included in the Company’s Surfactants segment. The following table summarizes the purchase price allocation for the acquisition:
(In thousands) |  |  |
Assets: |  |  |  |
Identifiable intangible assets: |  |  |  |
Customer lists |  | $ | 8,000 |
Trademarks and know-how |  |  | 1,300 |
Non-compete agreement |  |  | 300 |
Goodwill |  |  | 5,165 |
Property, plant and equipment |  |  | 175 |
Total assets acquired |  |  | 14,940 |
Liabilities: |  |  |  |
Other non-current liabilities |  |  | 940 |
Total liabilities assumed |  |  | 940 |
Net assets acquired |  | $ | 14,000 |
Logos Technologies Acquisition On March 13, 2020, the Company acquired certain assets of Logos Technologies LLC's NatSurFact® business, a rhamnolipid-based line of bio-surfactants derived from renewable sources. These bio-surfactants offer synergies in several strategic end use markets including oilfield, agriculture, personal care and household, industrial and institutional. The acquisition was accounted for as an asset acquisition. The purchase price of the acquisition was $2,040,000 and was paid with cash on hand. All assets acquired are included in the Company’s Surfactants segment. The assets acquired were primarily intangibles, including trademarks and know-how ($1,392,000) and patents ($464,000). Additionally, $184,000 of laboratory equipment was acquired.

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