Acquisitions

6 Months Ended

Jun. 30, 2020

3. Acquisitions

Acquisition of Foroni

Effective August 1, 2019, we completed the acquisition of Foroni, a leading provider of Foroni^®branded notebooks and paper-based school and office products in Brazil. The Foroni Acquisition advanced our strategy to expand in faster growing geographies and product categories, add consumer-centric brands and diversify our customer base. The results of Foroni are included in the ACCO Brands International segment effective August 1, 2019.

The purchase price was R$157.2 million (US$41.5 million based on July 31, 2019, exchange rates) inclusive of working capital adjustments. We also assumed $7.6 million in debt. A portion of the purchase price (R$25.0 million or US$6.6 million based on July 31, 2019 exchange rates) is being held in an escrow account for a period of up to 6 years after closing in the event of any claims against the sellers under the quota purchase agreement. The Company may also make claims against the sellers directly, subject to limitations in the quota purchase agreement, if the escrow is depleted. The Foroni Acquisition and related expenses were funded by cash on hand.

For accounting purposes, the Company was the acquiring enterprise. The Foroni Acquisition is being accounted for as a purchase business combination and Foroni's results are included in the Company’s condensed consolidated financial statements as of August 1, 2019. The net sales for Foroni for the three and six months ended June 30, 2020 were $1.3 million and $15.7 million, respectively.

The following table presents the preliminary allocation of the consideration given to the fair values of the assets acquired and liabilities assumed at the date of acquisition:


(in millions)	At August 1, 2019
Calculation of Goodwill:
Purchase price, net of working capital adjustment	$	41.5



Plus fair value of liabilities assumed:
Accounts payable and accrued liabilities	12.5
Deferred tax liabilities	4.0
Debt	7.6
Lease liabilities	5.6

Fair value of liabilities assumed	$	29.7

Less fair value of assets acquired:
Cash acquired	—
Accounts receivable	17.5
Inventory	12.5
Property and equipment	8.8
Identifiable intangibles	11.1
Deferred tax assets	2.7
Right of use asset, leases	5.6
Other assets	3.6
Fair value of assets acquired	$	61.8

Goodwill	$	9.4

Our review of the fair value estimates for assets acquired and liabilities assumed is substantially complete, pending the completion of reserves for income and other taxes as well as a final review by our management. We will finalize our fair value estimates during the third quarter ending September 30, 2020, which is within the one year measurement period from the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The preliminary goodwill of $9.4 million is primarily attributable to synergies expected to be realized from facility integration, headcount reduction, operational streamlining activities, and from the existence of an assembled workforce.

The final determination of the purchase price allocation, fair values and resulting goodwill may differ significantly from what is reflected in these condensed consolidated financial statements.

During the year ended December 31, 2019, transaction costs related to the Foroni Acquisition were $1.5 million, and for the six months ending June 30, 2020, they were $0.2 million. These costs were reported as selling, general and administrative ("SG&A") expenses in the Company's Consolidated Statements of Income.