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3. BUSINESS COMBINATIONS
RUSSIAN MDI, COATINGS AND SYSTEMS ACQUISITION
On July 3, 2012, we completed our acquisition of the remaining 55% ownership interest in International Polyurethane Investment B.V. (the "Russian Systems House Acquisition"). This company's wholly owned subsidiary, Huntsman NMG Zao, is a leading supplier of polyurethane systems to the adhesives, coatings and footwear markets in Russia, Ukraine and Belarus and is headquartered in Obninsk, Russia. The acquisition cost was approximately €13 million (approximately $16 million). The acquired business was integrated into our Polyurethanes segment. Transaction costs charged to expense related to this acquisition were not significant. The fair value of our existing 45% ownership interest immediately prior to the acquisition was $13 million, valued by applying the income approach. Key assumptions include a discount rate of 17% and a terminal growth rate of 4%. In connection with this transaction, we recorded a noncash pretax loss of approximately $4 million in other operating (income) expense on the consolidation of this investment. The long-term debt of approximately $7 million that was assumed as part of this transaction was repaid shortly after the acquisition date.
We have accounted for the Russian Systems House Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The preliminary allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
|
|
|
|
|
|
Fair value of original 45% ownership interest acquired in 2007
|
|
$ |
13 |
|
|
Acquisition cost of 55% ownership interest acquired in 2012
|
|
|
16 |
|
| |
|
|
|
|
Total fair value of net assets acquired
|
|
$ |
29 |
|
| |
|
|
|
|
Fair value of assets acquired and liabilities assumed:
|
|
|
|
|
|
Accounts receivable
|
|
$ |
2 |
|
|
Inventories
|
|
|
9 |
|
|
Other current assets
|
|
|
1 |
|
|
Property, plant and equipment
|
|
|
31 |
|
|
Accounts payable
|
|
|
(4 |
) |
|
Accrued liabilities
|
|
|
(1 |
) |
|
Deferred income taxes
|
|
|
(2 |
) |
|
Long-term debt
|
|
|
(7 |
) |
| |
|
|
|
|
Total fair value of net assets acquired
|
|
$ |
29 |
|
| |
|
|
|
The acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired and liabilities assumed, including final valuation of working capital, property, plant and equipment, intangible assets and the determination of related deferred taxes. For purposes of this preliminary allocation of fair value, we have assigned any excess of the acquisition cost over historical carrying values to property, plant and equipment and no amounts have been allocated to goodwill. It is possible that changes to this preliminary allocation could occur.
International Polyurethane Investment B.V. had revenues and earnings of $16 million and $3 million, respectively, for the period from the date of acquisition to September 30, 2012. If this acquisition were to have occurred on January 1, 2011, there would have been no significant impact to the combined earnings attributable to our Company or Huntsman International and the following estimated pro forma revenues attributable to our Company and Huntsman International would have been reported (dollars in millions):
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|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30, |
|
|
|
2011 |
|
2012 |
|
2011 |
|
|
Revenues
|
|
$ |
2,987 |
|
$ |
8,601 |
|
$ |
8,614 |
|
EMA ACQUISITION
On December 30, 2011, we completed the acquisition of EMA Kimya Sistemleri Sanayi ve Ticaret A.S. (the "EMA Acquisition"), an MDI-based polyurethanes systems house in Istanbul, Turkey for approximately $11 million, net of cash acquired and including the repayment of assumed debt. The acquired business was integrated into our Polyurethanes segment. We have accounted for the EMA Acquisition using the acquisition method and transaction costs charged to expense associated with this acquisition were not significant. For purposes of a preliminary allocation of the acquisition cost to assets acquired and liabilities assumed, we have assigned the excess of the acquisition cost over historical carrying values of $7 million to property, plant and equipment. At December 31, 2011, the excess of the acquisition cost over historical carrying values had been assigned as goodwill. This preliminary purchase price allocation is likely to change once we complete the analysis of the fair value of tangible and intangible assets acquired and liabilities assumed during the fourth quarter of 2012. Net sales for the three and nine months ended September 30, 2011 related to the business acquired were approximately $7 million and $19 million, respectively. Net losses for the three and nine months ended September 30, 2011 related to the business acquired were approximately $(1) million and $(3) million, respectively.
LAFFANS ACQUISITION
On April 2, 2011, we completed the acquisition of the chemical business of Laffans Petrochemicals Limited, an amines and surfactants manufacturer located in Ankleshwar, India (the "Laffans Acquisition") at a cost of approximately $23 million. The acquired business has been integrated into our Performance Products segment. Transaction costs charged to expense related to this acquisition were not significant.
We have accounted for the Laffans Acquisition using the acquisition method. As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed. The allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
|
|
|
|
|
|
Acquisition cost
|
|
$ |
23 |
|
| |
|
|
|
|
Fair value of assets acquired and liabilities assumed:
|
|
|
|
|
|
Accounts receivable
|
|
$ |
9 |
|
|
Inventories
|
|
|
2 |
|
|
Other current assets
|
|
|
2 |
|
|
Property, plant and equipment
|
|
|
12 |
|
|
Intangibles
|
|
|
3 |
|
|
Accounts payable
|
|
|
(3 |
) |
|
Accrued liabilities
|
|
|
(1 |
) |
|
Other noncurrent liabilities
|
|
|
(1 |
) |
| |
|
|
|
|
Total fair value of net assets acquired
|
|
$ |
23 |
|
| |
|
|
|
If this acquisition were to have occurred on January 1, 2011, the following estimated pro forma revenues and net income attributable to Huntsman Corporation and Huntsman International would have been reported (dollars in millions):
Huntsman Corporation
|
|
|
|
|
|
|
Pro Forma
Nine months
ended
September 30,
2011 |
|
|
Revenues
|
|
$ |
8,603 |
|
|
Net income attributable to Huntsman Corporation
|
|
|
143 |
|
Huntsman International
|
|
|
|
|
|
|
Pro Forma
Nine months
ended
September 30,
2011 |
|
|
Revenues
|
|
$ |
8,603 |
|
|
Net income attributable to Huntsman International
|
|
|
150 |
|
|