International Paper 2015 Annual Report Download - page 72

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NOTE 6 ACQUISITIONS AND JOINT VENTURES
OLMUKSAN
2014: In May 2014, the Company conducted a
voluntary tender offer for the remaining outstanding
12.6% public shares of Olmuksan. The Company also
purchased outstanding shares of Olmuksan outside of
the tender offer. As of December 31, 2014 and 2015,
the Company owned 91.7% of Olmuksan's outstanding
and issued shares.
2013: On January 3, 2013, International Paper
completed the acquisition (effective date of acquisition
on January 1, 2013) of the shares of its joint venture
partner, Sabanci Holding, in the Turkish corrugated
packaging company, Olmuksa International Paper
Sabanci Ambalaj Sanayi ve Ticaret A.S., now called
Olmuksan International Paper Ambalaj Sanayi ve
Ticaret A.S. (Olmuksan), for a purchase price of $56
million. The acquired shares represented 43.7% of
Olmuksan's shares. Prior to this acquisition,
International Paper held a 43.7% equity interest in
Olmuksan.
Because the transaction resulted in International Paper
becoming the majority shareholder, owning 87.4% of
Olmuksan's outstanding and issued shares, its
completion triggered a mandatory call for tender of the
remaining public shares which began in March 2013
and ended in April 2013, with no shares tendered. As
a result, the 12.6% owned by other parties were
considered non-controlling interests. Olmuksan's
financial results have been consolidated with the
Company's Industrial Packaging segment beginning
January 1, 2013, the effective date which International
Paper obtained majority control of the entity.
Following the transaction, the Company's previously
held 43.7% equity interest in Olmuksan was
remeasured to a fair value of $75 million, resulting in a
gain of $9 million. In addition, the cumulative translation
adjustment balance of $17 million relating to the
previously held equity interest was reclassified, as
expense, from accumulated other comprehensive
income.
The final purchase price allocation indicated that the
sum of the cash consideration paid, the fair value of the
noncontrolling interest and the fair value of the
previously held interest was less than the fair value of
the underlying assets by $21 million, resulting in a
bargain purchase price gain being recorded on this
transaction. The aforementioned remeasurement of
equity interest gain, the cumulative translation
adjustment to expense, and the bargain purchase gain
are included in the Net bargain purchase gain on
acquisition of business in the accompanying
consolidated statement of operations.
The following table summarizes the final allocation of
the purchase price to the fair value of assets and
liabilities acquired as of January 1, 2013, which was
completed in the fourth quarter of 2013.
In millions
Cash and temporary investments $5
Accounts and notes receivable 72
Inventory 31
Other current assets 2
Plants, properties and equipment 106
Investments 11
Total assets acquired 227
Notes payable and current maturities of long-term
debt 17
Accounts payable and accrued liabilities 27
Deferred income tax liability 4
Postretirement and postemployment benefit
obligation 6
Total liabilities assumed 54
Noncontrolling interest 18
Net assets acquired $155
Pro forma information related to the acquisition of
Olmuksan has not been included as it does not have a
material effect on the Company's consolidated results
of operations.
ORSA
2014: On April 8, 2014, the Company acquired the
remaining 25% of shares of Orsa International Paper
Embalangens S.A. (Orsa IP) from its joint venture
partner, Jari Celulose, Papel e Embalagens S.A. (Jari),
a Grupo Orsa company, for approximately $127 million,
of which $105 million was paid in cash with the
remaining $22 million held back pending satisfaction of
certain indemnification obligations by Jari. International
Paper will release the amount held back, or any amount
for which we have not notified Jari of a claim, by March
30, 2016. An additional $11 million, which was not
included in the purchase price, was placed in an escrow
account pending resolution of certain open matters.
During 2014, these open matters were successfully
resolved, which resulted in $9 million paid out of escrow
to Jari and correspondingly added to the final purchase
consideration. The remaining $2 million was released
back to the Company. As a result of this transaction,
the Company reversed the $168 million of Redeemable
noncontrolling interest included on the March 31, 2014
consolidated balance sheet. The net difference
between the Redeemable noncontrolling interest
balance plus $14 million of currency translation
adjustment reclassified out of Other comprehensive
income less the 25% purchase price was reflected as
an increase to Retained earnings on the consolidated
balance sheet.