Business combinations

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Subsidiaries and businesses acquired Nature of business   Operational segment   Date acquired   Interest
acquired
(%)
  Purchase
consideration
exceptional
transferred
Rm
 
RTT Health Sciences Supply chain services   Logistics – Africa
(including South Africa)
  January 2013   100   515  
Orwell Trucks Limited Vehicle sales and services   Automotive Retail   February 2013   100   118  
KWS Carriers (Pty) Limited Commodities transport   Logistics – Africa
(including South Africa)
  April 2013   60   48  
Individually immaterial business combinations                 95  
Total purchase consideration transferred                 776  

Reason for the acquisitions

RTT Health Sciences, one of Africa’s leading pharmaceutical and healthcare supply chain service providers was acquired to complement our logistics business within South Africa to extend our footprint in Africa.
Orwell Trucks Limited was acquired to expand our Automotive Retail business in the United Kingdom and complement our truck franchise.
KWS Carriers was acquired to expand the commodity’s transportation business within our Logistics division in South Africa.

Fair value of assets acquired and liabilities assumed at date of acquisition:
Total
Rm
  RTT Health
Sciences
Rm
  Orwell Trucks
Limited
Rm
  KWS Carriers
(Pty) Limited
Rm
  Individually
immaterial
acquisitions
Rm
 
Assets                    
Intangible assets 323   220   35   41   27  
Property, plant and equipment 95   55   14   6   20  
Transport fleet 72           53   19  
Deferred tax assets 1               1  
Inventories 151   14   113   1   23  
Trade and other receivables 442   264   51   62   65  
Cash resources 49   15   27       7  
  1 133   568   240   163   162  
Liabilities                    
Deferred tax liabilities 71   36   8   15   12  
Interest-bearing borrowings 73       22   29   22  
Non-current financial liabilities 8               8  
Trade and other payables and provisions 510   234   137   80   59  
Current tax liabilities 5   1   2       2  
  667   271   169   124   103  
Acquirees’ carrying amount at acquisition 466   297   71   39   59  
Less: Non-controlling interests (21)           (4)   (17)  
Net assets acquired 445   297   71   35   42  
Purchase consideration transferred 776   515   118   48   95  
– Cash 700   515   110   12   63  
– Contingent consideration 75       8   36   31  
– Fair value of previously held interest 1               1  
Excess of purchase consideration over net assets acquired 331   218   47   13   53  

Trade and other receivables acquired had gross contractual amounts of R452 million of which R10 million was doubtful. None of the goodwill is expected to be deductible for tax purposes. Non-controlling interests have been calculated based on their proportionate share.

Details of contingent consideration

The contingent consideration requires the group to pay the vendors an additional total amount of R75 million over three years if the acquired businesses’ net profit exceeds certain earnings targets.

Acquisition costs

Acquisition costs for acquisitions concluded during the year amounted to R7 million and have been recognised as expenses in profit or loss within business acquisition costs.

Impact of the acquisitions on the results of the group

Impact of the acquisitions on the results of the group
Total
Rm
  RTT Health
Sciences
Rm
  Orwell Trucks
Limited
Rm
  KWS Carriers
(Pty) Limited
Rm
  Individually
immaterial
acquisitions
Rm
 
From the dates of acquisition, the acquired businesses contributed:                    
Revenue 1 514   697   324   324   247  
Net profit as reported by entity 67   31   6   9   21  
Funding costs and amortisation of intangible assets arising on the business combinations (34)   (22)   (7)   (3)   (2)  
Net profit 33   9   (1)   6   19  

Had all the acquisitions been consolidated from 1 July 2012 the group’s revenue and net profit would have been R94 240 million and R3 710 million respectively, with the new acquisitions contributing additional revenue of R1 858 million and net profit of R24 million. The net profit of R24 million has been reduced by the funding costs of R3 million on the cash consideration and by the amortisation of intangible assets arising on the business combinations of R30 million.

 

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