3. Business combinations
Acquisition of Nexeo Solutions
On February 28, 2019, the Company completed its previously announced acquisition of 100% of the equity interest of Nexeo Solutions, Inc. (“Nexeo”), a leading global chemicals and plastics distributor. The acquisition expands and strengthens Univar Solutions’ presence in North America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution and the broadest product offering.
The total purchase price of the acquisition was $1,814.8 million, composed of $1,201.0 million of cash paid (net of cash acquired of $46.8 million) and $613.8 million of newly issued shares of Univar Solutions common stock, which represented approximately 26.4 million shares, based on Univar Solutions’ closing stock price of $23.29 on February 27, 2019. The final 26.4 million shares issued include the cancellation of 1.5 million shares in connection with the appraisal litigation settlement, see “Note 17: Commitments and contingencies” for more information.
The cash portion of the purchase price, acquisition related costs and repayment of approximately $936.3 million of Nexeo’s debt and other long-term liabilities were funded using the proceeds from the $781.5 million of incremental Term B Loans, $309.3 million borrowings under the New Senior ABL Facility and $175.0 million borrowings under the ABL Term Loan issued on February 28, 2019. Refer to “Note 13: Debt” for more information.
As of September 30, 2019, the Company updated the purchase price allocation to reflect adjustments from the third-party valuation firm's preliminary report valuing Nexeo’s tangible and intangible assets which included changes in working capital, assets and liabilities held for sale, property, plant and equipment, net, other assets and other liabilities. The adjustments to these balances resulted in a $65.0 million decrease to goodwill.
The initial accounting for this acquisition is considered preliminary, and is subject to adjustments on receipt of additional information relevant to the acquisition to complete the opening balances for deferred income taxes. This valuation is in process and the preliminary values below are based on initial information that continues to be subject to the completion of the valuation and allocation of the assets acquired.
The preliminary purchase price allocation at February 28, 2019 is as follows:
Trade accounts receivable, net
Prepaid expenses and other current assets
Assets held for sale
Property, plant and equipment, net
Intangible assets, net
Trade accounts payable
Other accrued expenses
Liabilities held for sale
Deferred tax liabilities
Other long-term liabilities
Purchase consideration, net of cash
Assets and liabilities held for sale are related to the Nexeo plastics distribution business (“Nexeo Plastics”). Nexeo Plastics was not aligned with the Company’s strategic objectives and, on March 29, 2019, the business was sold to an affiliate of One Rock Capital Partners, LLC for total proceeds of $664.3 million, net of cash disposed. Refer to “Note 4: Discontinued operations” for further information.
The Company recorded $617.2 million of goodwill, consisting of $600.7 million in the USA segment, $6.2 million in Canada and $10.3 million in LATAM. The goodwill is primarily attributable to expected synergies from combining operations. The Company is in process of determining the amount of goodwill that is deductible for income tax purposes.
The Company assumed 50.0 million warrants, equivalent to 25.0 million Nexeo shares, with an estimated aggregate fair value of $26.0 million at the February 28, 2019 closing date. The warrants were converted into the right to receive, upon exercise, the merger consideration consisting of approximately 7.6 million shares of Univar Solutions common stock plus cash. The warrants have an exercise price of $27.80. These warrants will expire on June 9, 2021. The Company recorded the warrants as other long-term liabilities within the condensed consolidated balance sheet. Refer to “Note 15: Fair value measurements” for more information.
The amounts of net sales and net loss from continuing operations related to the Nexeo chemical distribution business, included in the Company’s condensed consolidated statements of operations from March 1, 2019 to September 30, 2019 are as follows:
Net loss from continuing operations
The following unaudited pro forma financial information combines the unaudited results of operations as if the acquisition of Nexeo had occurred at the beginning of the periods presented below. The unaudited pro forma results for all periods presented below exclude the results of operations related to Nexeo Plastics, as this divestiture was reflected as discontinued operations. Refer to “Note 4: Discontinued operations” for additional information.
The unaudited pro forma financial information is as follows:
Three months ended September 30,
Nine months ended September 30,
Net income (loss) from continuing operations
The pro forma financial information is for comparative purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2018.
The unaudited pro forma information is based upon accounting estimates and judgments the Company believes are reasonable. The unaudited pro forma information reflects adjustments directly attributed to the business combination including amortization on acquired intangible assets, interest expense, transaction and acquisition related costs, depreciation related to purchase accounting fair value adjustments and the related tax effects.