Including the parent company Merck KGaA, Darmstadt, 228 (2010: 236 ) German and foreign companies were fully consolidated in the annual financial statements of the Merck Group. Of these companies, 206 (2010: 214) are located abroad. Four companies were consolidated for the first time within the scope of the acquisition of the microbiology business of Biotest AG, Dreieich, Germany. With the acquisition of Amnis Corporation, Seattle, WA (USA), two companies were added to the scope of consolidation. As of January 1, 2011, Beijing Skywing Technology Co., Ltd., Beijing, China was consolidated for the first time. A further three companies were consolidated for the first time due to their increased importance to the Merck Group. Eighteen companies were deconsolidated, nine of which were the result of a company merger, three companies were deconsolidated due to secondary importance, and two companies were liquidated. Three companies were deconsolidated due to divestment, two of which within the scope of the disposal of the Crop BioScience business as well as Serono Contracting Ltd., United Kingdom. In addition, Merck Capital Asset Management Limited, Malta, was deconsolidated in connection with the establishment of a Contractual Trust Arrangement (CTA) to externally finance the pension obligations of Merck KGaA. No companies were consolidated on a pro rata basis. The two associates included using the equity method were divested in 2011. This did not have a material impact on the consolidated financial statements.
Due to secondary importance, 25 (2010: 27) subsidiaries are not consolidated. The impact of each of these subsidiaries on sales, profit after tax, assets and equity is less than 1% relative to the entire Merck Group. The interests in subsidiaries not consolidated due to secondary importance are measured at cost and presented under non-current financial assets. A list of all the Merck Group’s shareholdings can be found in Note [56].
Acquisitions
At the end of December 2010, Merck acquired 100% of the shares in Beijing Skywing Technology Co., Ltd., Beijing, China. The acquired company, which is now part of the Merck Millipore division, is a leading supplier to the biopharmaceutical sector in China. The purchase price amounted to € 14.5 million. The first-time consolidation of Beijing Skywing Technology Co., Ltd. took place on January 1, 2011.
The microbiology business of Biotest AG, Dreieich, Germany, was acquired in the reporting period. The transaction closing and consequently the first-time consolidation of this business took place on August 1, 2011. The purchase price amounted to € 85.9 million. The ready-prepared culture media and tools of the acquired business complement the existing range of culture media and test systems of the Merck Millipore division.
On October 4, 2011, Merck acquired 100% of the shares in Amnis Corporation, Seattle, WA (USA). The acquisition expands the flow cytometry portfolio of the Merck Millipore division. The purchase price amounted to € 77.3 million. The first-time consolidation of Amnis Corporation took place on October 4, 2011.
In 2011, € 0.5 million was used to acquire non-controlling interests in a company that we had already fully consolidated.
Acquisition-related costs totaling € 1.5 million (€ 0.3 million of which in 2010) were incurred in connection with the aforementioned acquisitions and were expensed in the income statement. Within the scope of the purchase price allocation, the acquired assets and liabilities were recognized at fair values in the balance sheet in accordance with IFRS 3.
The acquisitions had the following effects on the consolidated balance sheet:
| XLS |
|
|
|
|
|
|
|
€ million |
Amnis |
Microbiology |
Beijing |
Total |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, marketable securities and other financial assets |
0.7 |
0.7 |
0.7 |
2.1 |
|
Inventories |
2.8 |
9.2 |
1.6 |
13.6 |
|
Receivables |
1.5 |
7.3 |
0.8 |
9.6 |
|
Other current assets |
0.1 |
0.2 |
0.2 |
0.5 |
|
|
5.1 |
17.4 |
3.3 |
25.8 |
|
Non-current assets |
|
|
|
|
|
Goodwill |
50.3 |
34.6 |
6.5 |
91.4 |
|
Other intangible assets |
26.9 |
46.5 |
5.8 |
79.2 |
|
Property, plant and equipment |
0.2 |
16.6 |
0.6 |
17.4 |
|
Other non-current assets |
– |
0.1 |
– |
0.1 |
|
Deferred tax assets |
– |
0.4 |
– |
0.4 |
|
|
77.4 |
98.2 |
12.9 |
188.5 |
|
Assets |
82.5 |
115.6 |
16.2 |
214.3 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Current financial liabilities |
– |
4.9 |
– |
4.9 |
|
Other current liabilities |
2.0 |
8.4 |
0.2 |
10.6 |
|
|
2.0 |
13.3 |
0.2 |
15.5 |
|
Non-current liabilities |
|
|
|
|
|
Non-current financial liabilities |
– |
1.1 |
– |
1.1 |
|
Provisions for pensions and other post-employment benefits |
– |
3.2 |
– |
3.2 |
|
Other non-current liabilities |
– |
0.1 |
– |
0.1 |
|
Deferred tax liabilities |
3.2 |
12.0 |
1.5 |
16.7 |
|
|
3.2 |
16.4 |
1.5 |
21.1 |
|
Liabilities |
5.2 |
29.7 |
1.7 |
36.6 |
|
|
|
|
|
|
|
Net assets acquired/purchase price |
77.3 |
85.9 |
14.5 |
177.7 |
The most significant impact of the purchase price allocation on the balance sheet and the income statement results from the fair value adjustment of intangible assets.
With respect to the microbiology business of Biotest AG, intangible assets relate particularly to the measurement of the existing customer relationships, and to a lesser extent to technologies and brands. The gross value of the acquired receivables at the time of the acquisition amounted to € 7.3 million. The best possible estimate of the irrecoverable debts amounted to less than € 0.1 million. The deferred tax liabilities disclosed relate mainly to the write-up of intangible assets. The remaining difference between the purchase price of € 85.9 million and fair values of € 51.3 million was reported as goodwill. This mainly includes the expertise of the workforce, increases in market shares and future synergy effects. Synergies are primarily expected in the areas of administration, purchasing, production as well as by combining certain subsidiaries abroad. The fair value adjustments made as part of the purchase price allocation are still to be considered as preliminary as of December 31, 2011. Only the measurement of inventories in the balance sheet as of the date of first-time consolidation is final. For all other balance sheet items, the accounting analyses and calculations have not yet been completed. Therefore, adjustments to these items could still occur in 2012 based on new information. The purchase price for the acquired microbiology business includes a purchase price component of € 15.1 million that has not yet been paid.
Within the scope of the purchase price allocation for Amnis Corporation, intangible assets were identified mainly for technologies, and to a lesser extent also for brands. The gross amounts of the acquired receivables were € 1.5 million at the time of the acquisition; no irrecoverable debts were identified. Tax-loss carryforwards that Merck can make use of were taken into consideration. This led to a decline in deferred tax liabilities that arose particularly in connection with the write-up of intangible assets. The remaining difference between the purchase price of € 77.3 million and fair values of € 27.0 million was disclosed as goodwill, which mainly includes market share increases, the expertise of the workforce and synergies that are primarily expected in R&D. The fair values are still to be considered as preliminary. Adjustments relating to the valuations on the acquisition date could still result in 2012.
The impact of the acquisitions on total revenues and profit after tax was as follows:
| XLS |
|
|
|
|
|
|
|
€ million |
Amnis |
Microbiology |
Beijing |
Total |
|
Total revenues |
3.4 |
19.4 |
5.2 |
28.0 |
|
Profit after tax |
0.0 |
–0.5 |
–0.5 |
–1.0 |
Profit after tax also included the amortization of the step-up of intangible assets within the scope of the purchase price allocation as well as higher cost of sales due to the step-up of the acquired inventories to fair values. Had the microbiology business and Amnis Corporation been included in the consolidated financial statements of the Merck Group as of January 1, 2011, for the period from January 1 to December 31, 2011 total revenues and profit after tax would have amounted to € 10,311.1 million and € 627.6 million, respectively.
The calculation of these figures assumed that the adjustments of the book values as a result of the purchase price allocation would have been identical. Consequently, amortization of intangible assets was included for 12 months. The step-up of the acquired inventories to fair values – in accordance with the assumed inventory turnover period – was taken into consideration in full. The information on the hypothetical consolidation of the microbiology business of Biotest AG as well as Amnis Corporation as of January 1, 2011 in the consolidated financial statements of the Merck Group is required under IFRS and only intended for comparability purposes. The comparison does not necessarily present a development that would have resulted had the microbiology business of Biotest AG as well as Amnis Corporation actually been consolidated as of January 1, 2011. Nor are these statements intended to project future events or results.
Divestment of the Crop BioScience business
The sale of our Crop BioScience business to Novozymes A/S, Denmark, took place in the first quarter of 2011. In the Group balance sheet as of December 31, 2010, the corresponding assets and liabilities were disclosed under “Assets held for sale” and “Liabilities directly related to assets held for sale”. The Performance Materials division generated sales of around € 46 million with this business in 2010. We received the proceeds of € 208.2 million from the divestment in the first quarter of 2011. Merck generated a gain on the sale of € 157.1 million, which is disclosed in the income statement under “Exceptional items.”
Based on the values on the closing date, the divestment of the Crop BioScience business had the following impact on the Group financial statements:
| XLS |
|
|
|
|
€ million |
2011 |
|
Current assets |
|
|
Cash and cash equivalents |
1.2 |
|
Inventories |
5.0 |
|
Receivables |
10.3 |
|
Other current assets |
0.6 |
|
|
17.1 |
|
Non-current assets |
|
|
Intangible assets |
13.3 |
|
Property, plant and equipment |
4.2 |
|
Other non-current assets |
2.0 |
|
|
19.5 |
|
Assets |
36.6 |
|
Current liabilities |
1.4 |
|
Non-current liabilities |
0.3 |
|
Liabilities |
1.7 |
|
Net assets |
34.9 |
|
|
|
|
Selling price |
208.2 |
|
Subtotal |
173.3 |
|
Realized currency translation differences |
–3.5 |
|
Transaction costs/provisions |
–12.7 |
|
Gain on the divestment |
157.1 |