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NOTE 3. DIVESTITURES AND ACQUISITIONS
Divestitures
In the second quarter of 2011, we sold certain assets and liabilities of our exhaust business which manufactures exhaust products and select components for emission systems for a variety of applications not core to our other product offerings. This business was historically included in our Components segment. The sales price was $123 million. We recognized a gain of $68 million ($37 million after-tax), which included a goodwill allocation of $19 million. In the second quarter of 2012, we recorded an additional $6 million gain ($4 million after-tax) related to final purchase price adjustments for our 2011 divestitures. The gains have been excluded from segment results as they were not considered in our evaluation of operating results for the three and six months ended July 1, 2012 and June 26, 2011.
Sales for this business were $62 million, $171 million and $126 million in 2011 (through closing), 2010 and 2009, respectively. Operating results for this business were approximately $9 million, $22 million and $11 million in 2011 (through closing), 2010 and 2009, respectively.
Pending Acquisitions
In April 2012, we reached an agreement to acquire the doser technology and business assets from Hilite Germany GmbH (Hilite) in a cash transaction. Dosers are products that enable compliance with emission standards in certain aftertreatment systems and complement our current product offerings. The transaction was approved by German regulators in June, closed on July 18, 2012, and will be reflected in our consolidated financial statements in the third quarter of 2012. The purchase price was approximately $176 million and is summarized below. There is no contingent consideration associated with this transaction. During the first six months of 2012 we expensed approximately $4 million of acquisition related costs.
The acquisition of Hilite was accounted for as a business combination, with the results of the acquired entity and the goodwill to be included in the Components operating segment in the third quarter of 2012. The majority of the purchase price will be allocated to technology and customer related intangible assets and goodwill, most of which is expected to be fully deductible for tax purposes. We expect the Hilite acquisition to strengthen our aftertreatment product offerings. This acquisition puts us in a strong position to meet the needs of current customers and grow into new markets, especially as an increasing number of regions around the world adopt tougher emission standards.
Intangible assets by asset class, including weighted average amortization life, are expected to be as follows:
|
Dollars in millions
|
|
Purchase price
allocation
|
|
Weighted average
amortization life
in years
|
|
|
Technology
|
|
$
|
52
|
|
10.6
|
|
|
Customer
|
|
23
|
|
4.5
|
|
|
License arrangements
|
|
8
|
|
6.0
|
|
|
Total intangible assets
|
|
$
|
83
|
|
8.5
|
|
We are in the process of finalizing certain aspects of the purchase price allocation. The purchase price is expected to be allocated as follows:
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In millions
|
|
|
|
|
Inventory
|
|
$
|
5
|
|
|
Fixed assets
|
|
5
|
|
|
Intangible assets
|
|
83
|
|
|
Goodwill
|
|
91
|
|
|
Liabilities
|
|
(8
|
)
|
|
Total purchase price
|
|
$
|
176
|
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Net sales for Hilite were $77 million for the 12 months ended December 31, 2011.
In July 2012, we acquired an additional 45 percent interest in Cummins Central Power from the former principal for consideration of approximately $17 million (subject to final adjustments), which will be reflected in our consolidated financial statements in the third quarter of 2012. The acquisition was accounted for as a business combination, with the results of the acquired entity to be included in the Distribution operating segment in the third quarter of 2012. We estimate that the transaction will include a $7 million gain, as we are required to re-measure our pre-existing 35 percent ownership interest in Cummins Central Power to fair value in accordance with GAAP.
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