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3. BUSINESS COMBINATIONS AND ACQUISITIONSÌý

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SEPARATION AND ACQUISITION OF ASSETS OF SLICÌýJOINT VENTURE

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On January 31, 2024, we completed the planned separation and acquisition of assets of Shanghai Lianheng Isocyanate Company Ltd. (“SLICâ€�),Ìýour joint venture with BASF and three Chinese chemical companies. The final purchase price of the acquired assets will be determined based on an asset valuation, which we currently expect to be completed in the first half of 2024. The acquisition of the assets was funded in part with ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Polyurethanes Shanghai Ltd., our 70%-owned consolidated joint venture in China (“HPSâ€�), issuing a U.S. dollar equivalent note payable at closingÌýof approximately $218 million, as adjusted to reflect the preliminary valuation and is subject to further change pending the final valuation. As of March 31, 2024, the note payable has been reduced by approximately $28Ìýmillion to reflect cash payments made during the quarter. We expect that the remainder of the note payable will be paid by the end of 2024 using available funds at HPS. Upon liquidation of the joint venture, all remaining cash of SLIC, primarily resulting from the proceeds received by SLIC, will be distributed back to the joint venture partners. We currently anticipate that the liquidation will be completed by mid-2025.

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The acquisition is being integrated into our Polyurethanes segment. Transaction costs related to this acquisition were not materialÌýfor the three months ended March 31, 2024.

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We have accounted for the acquisition using the acquisition method. As such, we analyzed the fair value of assets acquired. The preliminary allocation of acquisition cost to the assets acquired is summarized as follow (dollars in millions):

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The acquisition cost allocation is preliminary pending final determination of the fair value of assets acquired, including final valuation of certain inventories, property, plant and equipment, leases, other long-term assets and deferred taxes. It is possible that material changes to this preliminary valuation and allocation of acquisition cost could occur. The preliminary estimate of the total fair value of the assets acquired is in excess of the acquisition cost resulting in a preliminary net bargain purchase gain of approximately $52Ìýmillion. Concurrent with the acquisition of assets, we wrote off certain prepaid assets of approximately $71 millionÌýrelated to operating agreements with SLIC and otherÌýjoint venture partners.

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According to the operating agreement of the joint venture, SLIC sold all of its output to the joint venture partners with no external sales. After the separation and acquisition of assets, we use all of the output of the acquired assets for internal use. As such, the acquired business has no external revenues or net income.

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