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BUSINESS COMBINATIONS
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Jun. 30, 2013
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| BUSINESS COMBINATIONS |
3. BUSINESS COMBINATIONS NIPPON AQUA EQUITY INVESTMENT In March 2013, we completed the acquisition of a 20% equity interest in Nippon Aqua Co. Ltd. ("Nippon Aqua"), a spray polyurethane foam ("SPF") insulation company based in Yokohama, Japan. In addition, we entered into a 10 year supply agreement with the company. Nippon Aqua is the SPF market leader in Japan, with business operations in over 30 locations across the country, and is a subsidiary of leading residential home builder Hinokiya Holdings Co. Ltd. We supply various advanced MDI-based polyurethanes systems to Nippon Aqua. We have accounted for this investment using the equity method and have reported the equity earnings in our Polyurethanes segment. RUSSIAN MDI, COATINGS AND SYSTEMS ACQUISITION On July 3, 2012, we completed our acquisition of the remaining 55% ownership interest in International Polyurethane Investments 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 included a discount rate of 17% and a terminal growth rate of 4%. In connection with this transaction, during the third quarter of 2012 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, which resulted in the recording of $14 million of goodwill in the second quarter of 2013. The allocation of acquisition cost to the assets acquired and liabilities assumed is summarized as follows (dollars in millions):
If this acquisition were to have occurred on January 1, 2012, there would have been no significant impact to the combined earnings to our Company and Huntsman International. The following estimated pro forma revenues attributable to our Company and Huntsman International would have been reported (dollars in millions):
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