Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net

[Table of Contents](#ib75a44f638b042a5a7472d3f3be80b22_7)The preliminary purchase price allocation was as follows: 

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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |
| In millions |  |  |
| Cash and cash equivalents |  | $ | 18  |  |
| Accounts and notes receivable, net |  | 24  |  |
| Inventories |  | 15  |  |
| Property, plant and equipment |  | 70  |  |
| Intangible assets |  | 164  |  |
|  |  |  |
|  |  |  |
|  |  |  |
| Goodwill |  | 108  |  |
| Accounts payable (principally trade) |  | (21) |  |
| Net deferred taxes |  | (27) |  |
| Other, net |  | (5) |  |
| Total purchase price |  | $ | 346  |  |
|  |  |  |

The estimated fair values (all considered Level 3 measurements) of the identifiable intangible assets acquired, their weighted-average useful lives, the related valuation methodology and key assumptions are as follows:

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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|  |  | Fair Value (in millions) |  | Weighted-Average Useful Life (in years) |  | Valuation Methodology |  | Key Assumptions |  |  |  |  |  |
| Customer relationships |  | $ | 108  |  |  | 9 |  | Multi-period excess earnings |  | Rate of return, renewal rates |  |  |  |  |  |  |  |  |  |
| Technology |  | 31  |  |  | 7 |  | Relief-from-royalty |  | Royalty rate, rate of return, obsolescence factor |  |  |  |  |  |  |  |  |  |
| Trade name |  | 25  |  |  | 14 |  | Relief-from-royalty |  | Royalty rate, rate of return |  |  |  |  |  |  |  |  |  |
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Annual amortization of the intangible assets for the next five years is expected to approximate $18 million per year.Goodwill was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities. Approximately $9 million of the goodwill is deductible for tax purposes. Among the factors contributing to a purchase price resulting in the recognition of goodwill are Jacob’s expected future customers, new versions of technologies, an acquired workforce and other economic benefits that are anticipated to arise from future product sales and operational synergies from combining the business with Cummins.Included in our results for the three and nine months ended September 30, 2022, were revenues of $43 million and $80 million, respectively, and loss of $2 million and break-even, respectively, related to this business. The results of this business were reported in our Components segment. Pro forma financial information for the acquisition was not presented as the effects are not material to our Condensed Consolidated Financial Statements.Cummins Westport Joint VentureOn February 7, 2022, we purchased Westport Fuel System Inc.'s stake in the Cummins Westport Joint Venture. We will continue to operate the business as the sole owner. The purchase price was $42 million and was allocated primarily to cash, warranty and deferred revenue related to extended coverage contracts. The results of the business were reported in our Engine segment. Pro forma financial information for the acquisition was not presented as the effects are not material to our Condensed Consolidated Financial Statements.Pending AcquisitionPrior to our acquisition of Meritor, Meritor signed an agreement with Siemens to purchase its Commercial Vehicles business for approximately €190 million, subject to working capital and other customary adjustments. This business develops, designs and produces electric drive systems including electric motors, inverters, software and related services for the transit, off-highway and specialty markets. We expect the acquisition to close in the fourth quarter of 2022. This acquisition will be included in our New Power segment.28
