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Business Acquisitions
 6 Months Ended
Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Business Acquisitions Business Acquisitions
Neenah

On March 28, 2022, the Company entered into an Agreement and Plan of Merger to combine with Neenah, a specialty materials company incorporated in Delaware, in an all-stock merger of equals (the "Merger Agreement"), to create a global leader in specialty materials, accelerate growth and innovation, as well as achieve cost synergies. The Merger was approved by the shareholders of both the Company and Neenah on June 29, 2022 and was consummated on July 6, 2022. Under the terms of the Merger Agreement, which was unanimously approved by the board of directors of both companies, Neenah merged into a directly owned subsidiary of the Company, with Neenah surviving the Merger as a direct, wholly-owned subsidiary of Mativ.

Pursuant to the Merger Agreement, each share of Neenah's common stock outstanding was exchanged for 1.358 shares of common stock in the Company. As such, the Company issued approximately 22.8 million shares of its common stock to Neenah's shareholders under the terms of the Merger Agreement. Based on the Company's closing stock price on July 5, 2022, the total value of shares issued to Neenah's shareholders was approximately $534.1 million. The total consideration transferred to merge with Neenah was $1,056.3 million, which included the equity portion consideration of $534.1 million, repayment of Neenah's debt of $504.9 million, repayment of acquisition costs incurred by Neenah of $13.5 million and the fair value of unvested stock awards allocated to the pre-merger period of $3.8 million.

The Company used the proceeds of the borrowings under the amended Credit Agreement to repay existing indebtedness of Neenah and to pay other costs and expenses in connection with the Merger.
The transaction was accounted for as a business combination with the Company being treated as the accounting acquirer in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. Under this method of accounting, the total consideration has been allocated to Neenah's assets acquired and liabilities assumed based upon fair values at the Merger date. The assets acquired and liabilities assumed were measured at fair value as of the Merger date primarily using Level 3 inputs. The excess of the total consideration over the net assets acquired was recorded as goodwill and has been allocated to the ATM segment. The goodwill recorded is not expected to be deductible for tax purposes as it is primarily attributable to expected revenue and cost synergies. The estimated purchase price allocation disclosed as of September 30, 2022 was revised during the measurement period as new information was received and analyzed resulting in increases in Deferred income tax liabilities of $18.6 million, Intangible assets, net of $17.9 million, Property, plant and equipment, net of $10.0 million, Inventories, net of $2.7 million, as well as decreases in Goodwill of $11.6 million, Accounts payable and other current liabilities of $8.6 million, Accounts receivable, net of $8.5 million, and other immaterial changes, as presented in the table below. The amounts below represent the current preliminary fair value estimates. As additional information becomes available and as additional analyses and final allocations are completed, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which will not exceed twelve months from the closing of the acquisition. Such revisions or changes may be material.

The preliminary fair values of the assets acquired and liabilities assumed as of the Merger date were as follows (in millions):
Preliminary Allocation as of June 30, 2023AdjustmentsPreliminary Allocation as of July 6, 2022
Cash and cash equivalents$55.9 $— $55.9 
Accounts receivable, net198.1 (8.5)206.6 
Inventory, net194.5 2.7 191.8 
Other current assets27.8 0.3 27.5 
Property, plant and equipment, net463.6 10.0 453.6 
Intangible assets, net236.9 17.9 219.0 
Other assets41.7 (0.1)41.8 
Total assets$1,218.5 $22.3 $1,196.2 
Current debt$1.9 $— $1.9 
Accounts payable and other current liabilities199.3 (8.6)207.9 
Long-term debt22.8 — 22.8 
Deferred income tax liabilities86.3 18.6 67.7 
Other liabilities82.7 0.7 82.0 
Net assets acquired$825.5 $11.6 $813.9 
Goodwill230.8 (11.6)242.4 
Total consideration
$1,056.3 $— $1,056.3 

The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is immaterial.

Acquired inventory was comprised of finished goods, work in process and raw materials. The fair value of finished goods was based on net realizable value adjusted for the costs of selling and manufacturing and a reasonable profit margin on selling effort and manufacturing costs. The fair value of work in process was based on net realizable value adjusted for the costs of selling and a reasonable profit margin on selling effort. The fair value of raw materials was determined to approximate book value.
Property, plant and equipment is comprised of land, buildings and leasehold improvements, machinery and equipment, furniture and fixtures, computer equipment and construction in progress. The preliminary estimated fair value was primarily determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset.

Acquired intangible assets include customer relationships, trade names and developed technologies. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both forms of the income approach which considers a forecast of future cash flows generated from the use of each asset.

The following table sets forth the components of identifiable intangible assets (in millions) and their estimated useful lives (in years):
Fair ValueWeighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships$202.3 14.3
Trade names14.4 20
Developed technology20.2 7
Total amortizable intangible assets$236.9 

The preliminary estimate of deferred tax effects resulting from the Merger include the expected federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets acquired, liabilities assumed and the respective tax basis.

During the three and six months ended June 30, 2023, the Company did not recognize any direct and indirect merger-related costs. During the three and six months ended June 30, 2022, the Company recognized direct and indirect merger-related costs of $7.8 million and $13.6 million, respectively, predominantly related to legal and other professional fees. Direct and indirect merger-related costs were expensed as incurred and are primarily included in the General expense line item in the Consolidated Statements of Income (Loss).

Pro Forma Financial Information (Unaudited)

The unaudited supplemental pro forma financial information presents the combined results of operations for the periods presented, as if the Merger had occurred on January 1, 2021. The unaudited supplemental pro forma financial information includes the following adjustments related to the Merger: incremental depreciation expense related to fair value adjustments to property, plant and equipment, amortization of intangible assets, interest expense for the additional indebtedness incurred to complete the Merger, and applicable tax adjustments based on statutory rates in the jurisdictions where the adjustments occurred.

The unaudited supplemental pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the Merger occurred as of January 1, 2021 (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2022
Net sales$733.2 $1,424.8 
Net income22.6 20.3