Acquisitions and disposals

12 Months Ended

Dec. 31, 2019

Acquisition and disposal related costs of $1.4 million have been incurred in 2019. This amount includes a $3.5 million charge in relation to the reimbursement of costs and $0.9 million of professional and legal fees incurred in connection with the terminated Neo acquisition, partially offset by a $2.9 million gain from the sale of Magnesium Elektron CZ s.r.o in the second quarter of 2019 and a $0.1 million credit on the remeasurement of the deferred contingent consideration.

The net gain on disposal of the Czech business is outlined below:



In millions	2019
Cash proceeds	5.9
Less:
Cash held in business	(1.3	)
Purchase price adjustment	(0.2	)
Net proceeds	4.4
Net assets less cash	(3.6	)
Gain on disposal	0.8
Disposal costs	(0.4	)
Realized translation gain on disposal	2.5
Net gain on disposal	2.9

On December 28, 2018, Luxfer Holdings NA LLC (a 49% owned VIE joint venture) disposed of the assets and selected liabilities of Gas Transport Leasing LLC (its wholly-owned subsidiary) with the remaining 51% of Luxfer Holdings NA LLC simultaneously acquired by the Company. The disposal of the assets and selected liabilities to the JV partner was for consideration of $2.2 million. The Company acquired the residual 51% of Luxfer Holdings NA LLC, in return for the forgiveness of the JV partner's share on a loan from Luxfer Holdings PLC, being $2.1 million. The fair value of the net assets of Luxfer Holdings NA LLC at the acquisition date was assessed as $4.0 million, valuing the residual 51% stake at $2.1 million, resulting in no goodwill being recognized on the step acquisition.

The principal assets acquired include cash of $2.7 million (including $2.2 million from the sale of the leasing business), inventory ($1.1 million), accounts and other receivables ($0.8 million), property, plant and equipment ($0.2 million), with accounts payable of $0.8 million. There were no identified intangibles. As a consequence of the transaction we fully impaired our equity investment (from a pre-acquisition fair value of $1.6 million) and partially impaired the loan to the equity investment; the combined effect resulting in a net charge of $2.4 million being recognized in the consolidated statement of income, within impairment charges. At December 31, 2018, Luxfer Holdings NA LLC is 100% owned by the Company, is no longer considered a VIE and is a fully consolidated subsidiary. As the acquisition occurred very close to the year end date, no revenue or earnings are recorded in the consolidated statement of income for the reporting period.

On December 5, 2017, the Company acquired the trade and assets of the Specialty Metals business of ESM Group Inc., incorporating a manufacturing facility in Saxonburg, PA. The plant manufactures a range of magnesium-based chips, granules, ground powders and atomized powders. The acquired business was integrated with Luxfer’s existing business that currently offers similar products under the Luxfer Magtech brand. On closing, an initial consideration of $4.3 million was paid as well as an amount placed in general escrow of $0.3 million as deferred consideration. An additional $0.4 million, which has not been included as part of the purchase consideration, was placed in escrow for disbursement of environmental liabilities.

The fair value of net assets acquired was assessed as $5.8 million, resulting in a gain on bargain purchase of $1.2 million, which was recorded in the consolidated statements of income / (loss) within the Acquisition related costs line item. The principal assets acquired are land and buildings, $2.0 million; plant and equipment, $3.2 million; and inventory, $0.7 million; with assumed liabilities of $0.1 million. No separately identifiable intangibles were identified. The gain on bargain purchase resulted because the Specialty Metals business was not considered to be part of ESM Group's core business activities as it has adopted a strategy to focus on its steel industry customers. In implementing this strategy, ESM Group was eager to divest this non-core business, which was reflected in the transaction price. The Group believes that it can extract additional value from the site due to synergies with our existing Luxfer Magtech business.

In addition to the purchase consideration, $0.5 million of acquisition-related costs were incurred and a $0.4 million provision was set up for the disbursement of the environmental liabilities.

2. Acquisitions and disposals (continued)

Deferred contingent consideration

The deferred contingent consideration is in relation to the acquisition of Truetech and Innotech, (Luxfer Magtech) in 2015 and is linked to the future profitability of the entity. Where appropriate, this is payable annually from 2015 to 2020. The deferred contingent consideration totaled $0.5 million at December 31, 2019 (2018: $0.9 million), following a remeasurement of deferred contingent consideration at the year-end based upon the estimated future cash flows and the weighted probability of those cash flows being achieved, resulting in a credit to the consolidated income statement of $0.1 million (2018: debit of $0.9 million), net of an unwind of discount on deferred contingent consideration of $0.2 million (2018: $0.2 million). The entire consideration is deemed to be current and shown on the balance sheet within other current liabilities, as it is based on the performance of Luxfer Magtech for the year ending December 31, 2019. The potential undiscounted future payment has been estimated at $0.5 million (2018: $0.9 million). The maximum undiscounted amount payable under the sale agreement is $10.0 million.



	Years ended December 31,
In millions	2019		2018
Net cash flows on purchase of business:
Included in net cash flows from investing activities:
Cash acquired	—		2.7
Net cash flows on purchase of business	$	—	$	2.7



	Years ended December 31,
In millions	2019			2018
Net cash flows on purchase of business:
Included in net cash flows from financing activities:
Deferred consideration paid	$	(0.5	)	$	(0.8	)
Net cash flows on purchase of business	$	(0.5	)	$	(0.8	)