Full consolidation of Süd-Chemie India Ltd. (SCIL)

As of 1 April 2017 Clariant fully consolidated the company SCIL, which was until that time accounted for as a joint venture and as such was valued at equity. Clariant’s share in SCIL is 50%, while the other 50% are owned by private investors in India.

In view of SCIL’s significance for Clariant’s Catalysis activities in Asia, management successfully renegotiated the joint venture contracts. The new terms introduced a casting vote for Clariant to direct the relevant activities. The contractual change and the 50% voting rights resulted in Clariant obtaining control over SCIL.

As no consideration was paid, nor any shares were purchased or sold, this transaction is treated as an acquisition without consideration. Prior to the full consolidation Clariant already owned 50% of SCIL. In a first step this participation was revalued to fair value resulting in an income of CHF 10 million recognized in »Income from associates and joint ventures« in the income statement.

In a second step assets and liabilities of the company as per 1 April 2017 were included in the balance sheet, while the participation in the joint venture was derecognized. The co-owners’ share in SCIL is recognized in non-controlling interests. Goodwill, included in non-current assets, amounted to CHF 63 million.

The table below shows the allocation of the value to assets acquired and liabilities assumed.

The goodwill of CHF 63 million arising from the transaction is attributable to a number of factors such as future growth potential in line with historical levels and cost synergies.

Had the change of scope of consolidation taken place on 1 January, 2017 Group sales would have been CHF 16 million higher and the Group operating result would have been CHF 3 million higher, while the net result available to Clariant shareholders would have remained unchanged. Since the initial full consolidation as of 1 April 2017 the company contributed sales in the amount of CHF 37 million and a net result of CHF 20 million to the consolidated result.

Acquisition of Kel-Tech Inc.

On 1 October 2016 Clariant acquired from Arsenal Capital Partners 100% of the shares of Kel-Tech Inc. for a total consideration of CHF 223 million, out of which CHF 202 million were paid in 2016 and CHF 21 million were considered as contingent consideration.

As the sales goals that would have triggered an earn-out up to a maximum of CHF 35 million were not met in 2017 the respective provision in the amount of CHF 21 million was reversed in the line »Sales, general & administration« in the income statement in 2017.

The acquired company is based in Midland, Texas, USA, and is a manufacturer and supplier of specialty chemicals for production, field stimulation and drilling applications in the oil-service business throughout onshore United States. This acquisition pertains to the Business Unit Oil & Mining Services.

Since its acquisition, Kel-Tech Inc. is fully consolidated in Clariant’s financial statements. The summary of the financial impact of consolidating Kel-Tech Inc. in the accounts at the acquisition date, using the fair values of identified assets and liabilities is as reported below. The acquired intangible assets comprise mainly customer relationships, developed technology, know-how and the trade name.

In 2017 the provisional fair values of the acquired net assets of Kel-Tec Inc. were adjusted within the measurement period following the acquisition. As a result goodwill decreased by CHF 14 million to CHF 119 million compared to CHF 133 million at the acquisition date. The major part of the adjustment concerns the recognition of a deferred tax asset on losses incurred prior to the acquisition date, the valuation of property, plant and equipment and inventories.

For this acquisition, costs of CHF 2 million, comprising M&A, legal costs, tax advisory and consulting charges, were recognized in »Selling, general and administrative costs« in the year 2016.

From the acquisition date up to the end of the year 2016, Kel-Tech Inc. reported net sales of CHF 20 million and a breakeven operating result including CHF 2 million of depreciation and amortization. This result includes the above-mentioned items of a one-time nature which were incurred in connection with the takeover by Clariant. If the acquisition had occurred on 1 January 2016, Group sales would have been CHF 59 million higher and the operating result would have been CHF 5 million higher.

Acquisition of X-Chem LLC

On 1 October 2016 Clariant acquired from NCH Corporation the activities of X-Chem LLC in a combined asset and share deal for a total consideration of CHF 140 million. The acquired company is based in Irving, Texas, USA and is a provider of specialty oilfield chemicals for the production, completion and stimulation of oil wells, gas wells and pipelines focused on land and offshore United States.

This acquisition pertains to the Business Unit Oil & Mining Services.

Since its acquisition, X-Chem LLC is fully consolidated in Clariant’s financial statements. The summary of the financial impact of consolidating X-Chem LLC in the accounts at the acquisition date, using the fair values of identified assets and liabilities is as reported below. The acquired intangible assets comprise mainly customer relationships, developed technology, know-how and the trade name.

In 2017 the provisional fair values of the acquired net assets of X-Chem LLC were adjusted within the measurement period following the acquisition. As a result goodwill increased by CHF 8 million to CHF 22 million compared to CHF 14 million at the acquisition date, mainly as a correction of the value of inventories and property, plant and equipment taken over.

For this acquisition costs of CHF 3 million, comprising M&A, legal costs, tax advisory and consulting charges, were recognized in »Selling, general and administrative costs« in the year 2016.

From the acquisition date up to the end of the year 2016, X-Chem LLC reported net sales of CHF 20 million and a breakeven operating result including CHF 2 million of depreciation and amortization. This result includes the above-mentioned items of a one-time nature which were incurred in connection with the takeover by Clariant. If the acquisition had occurred on 1 January 2016, Group sales would have been CHF 64 million higher and the operating result would have remained at the same level.

The goodwill arising from the acquisition of Kel-Tech Inc. and X-Chem LLC is attributable to a number of factors such as future growth potential in line with historical levels, significant cost synergies and the acquired workforce.

Acquisition of the Vivimed personal care portfolio

On 8 January 2016 Clariant acquired the specialty chemicals segment of Vivimed Labs Ltd, India. This acquisition complements Clariant’s personal care portfolio in India with actives to formulate broader solutions within the sun, skin, hair and oral care range as well as antimicrobial preservatives. It expands Clariant footprint in the region of the Business Unit Industrial & Consumer Specialties (ICS).

Since its acquisition by Clariant India Ltd, the acquired business is fully consolidated in its financial statements. The summary of the financial impact at the acquisition date on Clariant consolidated accounts, using the fair values of identified assets and liabilities, is as reported below. The intangible assets acquired consist of customer relationships, technical know-how and in-process research and development projects.

For this acquisition costs of CHF 0.5 million, comprising M&A and consulting charges, were recognized in »Selling, general and administrative costs« in the year 2016.

The goodwill resulting from this acquisition is attributable to a number of factors such as future growth potential, cost synergies and the acquired workforce.

Acquisition of the remaining shares in the Consortium with Carboflex

On 13 June 2016 Clariant acquired the Carboflex 50% stake in the consortium that built and operates a plant in Rio de Janeiro in Brazil. The facility produces chemicals used in oil and gas wells. The purchase price for the remaining 50% shares totals CHF 11 million, out of which CHF 8 million were paid in June 2016 and the remaining CHF 3 million are held back for potential indemnifications by Clariant on behalf of Carboflex. The assets acquired mainly consist of customer relationships and property, plant and equipment.

The transaction was treated as a two-step acquisition. The 50% shares already held were remeasured to fair value, which led to an income of CHF 7 million, recognized in Income from associates and joint ventures. No material goodwill arose on the acquisition.

This acquisition pertains to the Business Unit Oil & Mining Services.

Acquisition of SQE Olivene S.r.l.

On 1 March 2016 Clariant acquired 100% of the shares of SQE Olivene S.r.l., Italy from a private owner. The company specializes in the manufacture of squalenes and squalanes used in the cosmetics industry. The purchase price amounted to CHF 3 million. The assets acquired mainly consist of intangibles (customer lists, tradenames and a non-compete clause) and inventories. The generated goodwill amounts to CHF 1 million. This acquisition pertains to the Business Unit Industrial & Consumer Specialties (ICS).

Acquisition of the Mining Service Business of Flomin Inc.

On 31 October 2016 Clariant purchased from Flomin Inc., Delaware, USA, the Mining Service activities consisting of customer relationships, developed technology and inventories. The business consists of the manufacture and sale of specialty reagents including collectors, frothers and solvent extractants for the global mining industry. The purchase price amounted to CHF 11 million and resulted in a goodwill of CHF 5 million. This acquisition pertains to the Business Unit Oil & Mining Services.

Acquisition of Chemical & Mining Services Pty Ltd

On 1 November 2016 Clariant purchased 100% of the shares of Chemical & Mining Services Pty Ltd, Australia, from private investors. The company is a supplier of flotation reagents and technical services relating to base and precious metals flotation to the mineral processing industry. The purchase price totals CHF 5 million out of which CHF 4 million were paid and the remaining CHF 1 million represent a contingent consideration that will be due if certain sales targets are met in 2018.

In 2017 the provisional fair values of the acquired net assets were adjusted within the measurement period following the acquisition and resulted in a final goodwill of CHF 2 million.

This acquisition pertains to the Business Unit Oil & Mining Services.