Acquisitions
NCRA:
On November 29, 2011, our Board of Directors approved a stock transfer agreement, dated as of November 29, 2011, between us and GROWMARK, Inc. (Growmark), and a stock transfer agreement, dated as of November 29, 2011, between us and MFA Oil Company (MFA). Pursuant to these agreements, we have begun to acquire from Growmark and MFA shares of Class A common stock and Class B common stock of NCRA representing approximately 25.571% of NCRA’s outstanding capital stock. Prior to the first closing, we owned the remaining approximately 74.429% of NCRA’s outstanding capital stock as of August 31, 2012 and accordingly, upon completion of the acquisitions contemplated by these agreements, NCRA will be a wholly-owned subsidiary. As of August 31, 2013, our ownership was 79.2% and with the closing in September 2013, our ownership increased to 84.0%.
Pursuant to the agreement with Growmark, we will acquire stock representing approximately 18.616% of NCRA’s outstanding capital stock in four separate closings held or to be held on September 1, 2012, September 1, 2013, September 1, 2014 and September 1, 2015, for an aggregate base purchase price of $255.5 million (approximately $48.0 million of which has or will be paid at each of the first three closings, and $111.4 million of which will be paid at the final closing). In addition, Growmark is entitled to receive up to two contingent purchase price payments following each individual closing, calculated as set forth in the agreement with Growmark, if the average crack spread margin referred to therein over the fiscal year ending on August 31 of the calendar year in which the contingent payment date falls exceeds a specified target.
Pursuant to the agreement with MFA, we will acquire stock representing approximately 6.955% of NCRA’s outstanding capital stock in four separate closings held or to be held on September 1, 2012, September 1, 2013, September 1, 2014 and September 1, 2015, for an aggregate base purchase price of $95.5 million (approximately $18.0 million of which has or will be paid at each of the first three closings, and $41.6 million of which will be paid at the final closing). In addition, MFA is entitled to receive up to two contingent purchase price payments following each individual closing, calculated as set forth in the agreement with MFA, if the average crack spread margin referred to therein over the fiscal year ending on August 31 of the calendar year in which the contingent payment date falls exceeds a specified target.
As all conditions associated with the purchase have been met, we have accounted for this transaction as a forward purchase contract which required recognition in the first quarter of fiscal 2012 in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480). As a result, we are no longer including the noncontrolling interests related to NCRA as a component of equity. Instead, we recorded the present value of the future payments to be made to Growmark and MFA as a liability on our Consolidated Balance Sheets as of November 30, 2011. The liability as of August 31, 2013 and 2012 was $275.4 million and $334.7 million, including interest accretion of $6.7 million and $6.0 million, respectively. Noncontrolling interests in the amount of $337.1 million was reclassified and an additional adjustment to equity in the amount of $96.7 million was recorded as a result of the transaction. The equity adjustment included the initial fair value of the crack spread contingent payments of $105.2 million. The fair value of the liability associated with the crack spread contingent payments was calculated utilizing an average price option model, an adjusted Black-Scholes pricing model commonly used in the energy industry to value options. As of August 31, 2013 and 2012, the fair value of the crack spread contingent payments was $150.6 million and $127.5 million, respectively, and is included on our Consolidated Balance Sheets in other liabilities with an increase of $23.1 million and $22.3 million included in cost of goods sold in our Consolidated Statements of Operations during the years ended August 31, 2013 and 2012, respectively. The first crack spread contingent payment in the amount of $16.5 million was made in October 2013. The portion of NCRA earnings attributable to Growmark and MFA for the first quarter of fiscal 2012, prior to the transaction date, were included in net income attributable to noncontrolling interests. Beginning in the second quarter of fiscal 2012, in accordance with ASC 480, earnings are no longer attributable to the noncontrolling interests, and patronage earned by Growmark and MFA is included as interest, net in our Consolidated Statements of Operations. During the years ended August 31, 2013 and 2012, $142.4 million and $107.2 million, respectively, was included in interest for the patronage earned by Growmark and MFA.
Solbar:
On February 9, 2012, we completed the acquisition of Solbar Industries Ltd., an Israeli company (Solbar), included in our Ag segment. Effective upon the closing of the merger, each outstanding share of Solbar was converted into the right to receive $4.00 in cash, without interest, and each outstanding Solbar stock option was terminated in exchange for a cash payment in an amount per share equal to the difference between the applicable exercise price per share and $4.00, for total consideration paid of $128.7 million, net of cash acquired of $6.6 million. Solbar provides soy protein ingredients to manufacturers in the meat, vegetarian, beverage, bars and crisps, confectionary, bakery, and pharmaceutical manufacturing markets. This acquisition deepens our presence in the value-added soy protein market. The fair market value of net assets was determined by market valuation reports using Level 3 inputs. Allocation of purchase price for this transaction resulted in goodwill of $39.8 million, which is nondeductible for tax purposes, and definite-lived intangible assets of $23.3 million. As this acquisition is not material, proforma results of operations are not presented. Solbar and its subsidiaries operate primarily in the countries of Israel, China and the U.S. The acquisition resulted in fair value measurements that are not on a recurring basis and did not have a material impact on our consolidated results of operations. Purchase accounting has been finalized and fair values assigned to the net assets acquired were as follows:
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| | | | |
| | (Dollars in thousands) |
Current assets | | $ | 74,240 |
|
Investments | | 961 |
|
Property, plant and equipment | | 71,324 |
|
Goodwill | | 39,794 |
|
Definite-lived intangible assets | | 23,306 |
|
Current liabilities | | (63,417 | ) |
Long-term debt | | (15,849 | ) |
Other liabilities | | (1,694 | ) |
Total net assets acquired | | $ | 128,665 |
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Creston:
In November 2011, we acquired an oilseed crushing facility in Creston, Iowa for $32.3 million.
