Acquisition of Venco
On 17 December 2018, Dechra acquired the entire share capital of Laboratorios Vencofarma do Brasil Ltda (Venco), a company with a large portfolio of vaccines and other Food producing Animal Products which it sells predominantly in Brazil. The Group paid £34.8 million (BRL163.8 million) consideration in cash.
| Fair Value
£m |
|---|
| Recognised amounts of identifiable assets acquired | |
| Identifiable assets | |
| Property, plant and equipment | 6.7 |
| Inventory | 6.1 |
| Trade and other receivables | 4.5 |
| Trade and other payables | (6.4) |
| Cash | 0.5 |
| Borrowings | (2.8) |
| Intangible assets | 14.7 |
| Current tax liabilities | (0.5) |
| Deferred taxation | (6.0) |
| Net identifiable assets | 16.8 |
| Goodwill | 18.0 |
| Total consideration | 34.8 |
| Satisfied by: | |
| Cash | 34.8 |
| Total consideration transferred | 34.8 |
| Net cash outflow arising on acquisition | |
| Cash consideration | 34.8 |
| Less cash and cash equivalents | (0.5) |
| Net cash outflow arising on acquisition | 34.3 |
The fair values shown above are provisional and may be amended if information not currently available comes to light. The provisional fair value adjustments made principally relate to harmonisation with Group IFRS accounting policies, including the application of fair values on acquisition, principally the recognition of fair value uplift on acquired inventory and intangibles in accordance with IFRS 3.
The goodwill of £18.0 million arising from the acquisition consists of geographical expansion in the Brazilian and South American markets, cross-selling synergies with other Dechra products, and the technical expertise of the assembled workforce.
Acquisition related costs (included in non-underlying operating expenses) amounted to £1.3 million. Venco's results are reported within the EU Pharmaceuticals Segment.
Venco contributed £8.3 million revenue and £2.1 million underlying operating profit for the period between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first date of the financial year, the contribution to Group revenues for the period would have been £15.7 million and the contribution to Group underlying operating profit would have been £3.8 million. The reported operating profit after taking into account non-underlying items for the amortisation of intangible assets and the fair value uplift on inventory would be £0.1 million.
The fair value of the assets and liabilities acquired have been reconsidered since the Half Yearly Report at 31 December 2018 as part of the measurement period. Hindsight adjustments have been made in relation to consideration for the completion payment (£1.6 million), cash (£0.6 million), inventory (£1.5 million), intangibles (£0.1 million), tangible assets (£0.4 million) following an independent valuation of the land and buildings acquired, payables predominantly due to the reclassification of other taxes from current tax liabilities (£3.5 million), borrowings (£0.8 million), current tax liabilities (£3.1 million) and deferred tax (£0.3 million) predominantly due to fair value adjustments.
Acquisition of Caledonian
On 8 October 2018, Dechra acquired the trade and assets of Caledonian Holdings Ltd, an equine veterinary pharmaceuticals sales and distribution company based in New Zealand and Australia. The Group paid £4.4 million (NZD8.7 million) consideration in cash.
| Fair value
£m |
|---|
| Recognised amounts of identifiable assets acquired and liabilities assumed | |
| Inventory | 0.8 |
| Trade and other receivables | 0.3 |
| Trade and other payables | (0.3) |
| Intangible assets | 4.0 |
| Deferred taxation | (1.2) |
| Net identifiable assets | 3.6 |
| Goodwill | 0.8 |
| Total consideration | 4.4 |
| Satisfied by: | |
| Cash | 4.4 |
| Total consideration transferred | 4.4 |
| Net cash outflow arising on acquisition | |
| Cash consideration | 4.4 |
| Net cash outflow arising on acquisition | 4.4 |
The fair values shown above are provisional and may be amended if information not currently available comes to light. The provisional fair value adjustments made principally relate to harmonisation with Group IFRS accounting policies, including the application of fair values on acquisition, principally the recognition of fair value uplift on acquired inventory and intangibles in accordance with IFRS 3.
The goodwill of £0.8 million arising from the acquisition consists of continued geographic expansion into Australia and New Zealand, and also enables Dechra to grow its market penetration of equine products in the Asian market. None of the goodwill is expected to be deductible for income tax purposes.
Acquisition related costs (included in non-underlying operating expenses) amounted to £0.1 million. Caledonian's results are reported within the EU Pharmaceuticals Segment.
Caledonian contributed £1.5 million revenue and £0.8 million to the Group's underlying operating profit for the period between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first date of the financial year, the contribution to Group revenues for the period would have been £2.0 million and the contribution to Group underlying operating profit would have been £1.0 million. The reported operating profit after taking into account non-underlying items for the amortisation of intangible assets and the fair value uplift on inventory would be £0.2 million.
Prior Year Acquisitions
Following the acquisition of RxVet in December 2017, and AST Farma and Le Vet in February 2018, the disclosure of the final fair values of the assets and liabilities acquired has been included in the financial statements for the year ended 30 June 2018.