Eli Lilly 2015 Annual Report Download - page 66

F54
FINANCIAL REPORT
Acquisitions of Businesses
Novartis AH Acquisition
Overview of Transaction
On January 1, 2015, we acquired from Novartis AG all of the shares of certain Novartis subsidiaries and all of
the assets and liabilities of other Novartis subsidiaries that are exclusively related to the Novartis AH business
in an all-cash transaction for a total purchase price of $5.28 billion. As of December 31, 2014, there was $5.41
billion of cash held in escrow for the pending acquisition of Novartis AH. This cash was classified as restricted
cash, a noncurrent asset, on our consolidated balance sheet.
As a condition to the clearance of the transaction under the Hart-Scott-Rodino Antitrust Improvements Act,
following the closing of the acquisition of Novartis AH, we divested certain animal health assets in the U.S.
related to the Sentinel® canine parasiticide franchise to Virbac Corporation for approximately $410 million.
The acquired Novartis AH business consists of the research and development, manufacture, marketing, sale
and distribution of veterinary products to prevent and treat diseases in pets, farm animals, and farmed fish.
Under the terms of the agreement, we acquired manufacturing sites, research and development facilities, a
global commercial infrastructure and portfolio of products, a pipeline of projects in development, and
employees.
Assets Acquired and Liabilities Assumed
The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the
acquisition date:
Estimated Fair Value at January 1, 2015
Inventories $ 380.2
Acquired in-process research and development 298.0
Marketed products(1) 1,953.0
Property and equipment 199.9
Assets held for sale (primarily the U.S. Sentinel rights) 422.7
Accrued retirement benefits (108.7)
Deferred income taxes (60.1)
Other assets and liabilities - net (73.0)
Total identifiable net assets 3,012.0
Goodwill(2) 2,271.1
Total consideration transferred - net of cash acquired $ 5,283.1
(1) These intangible assets, which will be amortized to cost of sales on a straight-line basis over their estimated useful lives, are expected
to have a weighted average useful life of 19 years.
(2) The goodwill recognized from this acquisition is attributable primarily to expected synergies that we believe will result from combining
the operations of Novartis AH with our legacy animal health business, future unidentified projects and products, and the assembled
workforce of Novartis AH. Approximately $950 million of the goodwill associated with this acquisition is estimated to be deductible for
tax purposes.
Actual and Supplemental Pro Forma Information
Our consolidated statement of operations for the year ended December 31, 2015 includes Novartis AH
revenue of $1.02 billion. Novartis AH has been partially integrated into our animal health segment and as a
result of these integration efforts, certain parts of the animal health business are operating on a combined
basis, and we cannot distinguish the operations between Novartis AH and our legacy animal health business.