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Note 3. Business acquisitions and disposals of assets
Acquisitions
On 12 April 2016, Kesko Food Ltd, a Kesko Corporation subsidiary, acquired the whole share capital of Suomen Lähikauppa Oy from the private equity investment firm Triton. Kesko Corporation acquired Onninen Oy's whole share capital from Onvest Oy on 1 June 2016. VV-Auto Group acquired the whole share capital of Oy Autocarrera Ab and as a result, the import and retailing of Porsche transferred to VV-Auto.
Suomen Lähikauppa Onninen Group Oy Auto-
carrera Ab
€ million € million € million
Consideration paid 54 364 27
Provisionally determined fair values of assets acquired and liabilities assumed as at the date of acquisition
Intangible assets 5 94 2
Tangible assets and investments 33 21 1
Inventories 33 227 9
Receivables 12 238 4
Deferred tax asset 22 3 -
Cash and cash equivalents 8 17 0
Total assets 113 599 16
Trade payables, other payables, provisions 134 275 7
Deferred tax liability 0 16 1
Total liabilities 134 291 8
Net assets acquired, total -22 309 8
Goodwill 76 55 19
Cash flow impact of acquisition
Consideration paid -54 -364 -25
Cash and cash equivalents acquired 8 17 0
Cash flow impact of acquisition -46 -347 -25
Suomen Lähikauppa Oy
On 12 April 2016, Kesko Food Ltd, a Kesko Corporation subsidiary, acquired the whole share capital of Suomen Lähikauppa Oy from the private equity investment firm Triton. The debt-free price of the acquisition, structured as a share purchase, was €54 million.
Suomen Lähikauppa has concentrated on grocery stores located near customers. The acquisition underpins Kesko's new strategy, one focus area of which is to increase and renew the neighbourhood store network.
The tables above are a condensed presentation of the consideration paid to Triton, the values of the assets acquired and liabilities assumed by Kesko Group as at the date of the acquisition, as well as the cash flow impact of the acquisition.
The €76 million goodwill from the acquisition reflects the synergies expected to arise especially from purchasing and logistics, marketing, store site network development, information system expenses and administration. Kesko estimates that it will gain annual synergy benefits of over 30 million at EBITDA level from the acquisition as of 2018. The achievement of synergies will require conversion costs for the renewal of the stores acquired from Suomen Lähikauppa. The costs of store and network conversion, to be treated as restructuring costs affecting the comparability of the operating profit, will total approximately €30 million in 2016-2018. The goodwill derived from the acquisition is not tax deductible.
The Group's profit for January-December 2016 includes costs incurred from an acquisition in the amount of €1.2 million, the most significant of which is the €0.6 million asset transfer tax. The costs are presented within items affecting comparability.
Suomen Lähikauppa contributed €575 million to the net sales of the April-December period. The impact on the comparable operating profit for the April-December period was €-7.4 million and taking synergies into account, €-3.2 million. Management estimates that if the acquisition had been completed on 1 January 2016, the impact on the Group's net sales would have been approximately €795 million. The impact on the comparable operating profit would have been €-17 million. When determining the amounts of net sales and comparable operating profit, management estimates that the fair values recognized at the date of acquisition would have been the same if the acquisition had been completed on 1 January 2016.
Onninen Oy
Kesko Corporation acquired Onninen Oy's whole share capital from Onvest Oy on 1 June 2016. The debt-free price of the acquisition, structured as a share purchase, was €364 million.
Onninen is one of the leading providers of HEPAC and electrical products and services in the Baltic Sea Region and Scandinavia. The group specialises in the B2B trade and has around 140 places of business in Finland, Sweden, Norway, Poland, the Baltic countries and Russia. Kesko's business operations will expand in the HEPAC and electrical product groups and it will be able to better serve contractor customers in particular. In addition, Kesko will gain new customer relationships in the infrastructure and industry customer groups.
The tables above are a condensed presentation of the consideration paid to Onvest Oy, the values of the assets acquired and liabilities assumed by Kesko Group as at the date of the acquisition, as well as the cash flow impact of the acquisition.
The total value of the intangible assets acquired as at the date of the acquisition (including customer relationships and trademarks) is €94 million. The balance sheet value of current trade receivables equals their fair value.
The €55 million goodwill from the acquisition reflects the synergies expected to mainly arise from the utilisation of the common customer relationships, from purchasing and logistics, the development of the store site network, as well as from ICT and administration. Kesko estimates that it will gain annual synergy benefits of approximately €30 million at EBITDA level from the acquisition as of 2020. The achievement of synergies will require both capital expenditures and non-recurring costs. The combined net cash flow impact of synergy benefits is estimated at around €25 million positive in 2016-2019. The goodwill derived from the acquisition is not tax deductible.
The Group's profit for January-December 2016 include costs incurred from an acquisition in the amount of €6.8 million, the most significant of which is the €5.8 million asset transfer tax. The costs are presented within items affecting comparability.
Onninen contributed €908 million to the net sales of the June-December period. The impact on the comparable operating profit for the June-December period was €18.2 million, adversely impacted by the fair value allocations of inventories written off in the amount of €5.1 million. Management estimates that if the acquisition had been completed on 1 January 2016, the impact on the Group's net sales would have been approximately €1,500 million. The impact on the comparable operating profit would have been €17.7 million. When determining the amounts of net sales and comparable operating profit, management estimates that the fair values recognized at the date of acquisition would have been the same if the acquisition had been completed on 1 January 2016.
Oy Autocarrera Ab
In December VV-Auto Group, a Kesko Corporation subsidiary, acquired the whole share capital of Oy Autocarrera Ab. As a result, the import and retailing of Porsche transferred to VV-Auto. The price of the acquisition, structured as a share purchase, was €27 million.
The tables above are a condensed presentation of the consideration paid, the values of the assets acquired and liabilities assumed by Kesko Group as at the date of the acquisition, as well as the cash flow impact of the acquisition.
The €19 million goodwill derived from the acquisition reflects the synergies and growth potential expected to be realised as Porsche increases VV-Auto's car selection. The acquisition will also create synergies in the car trade processes, suc as purchases, store site network, logistics, ICT and administration. The goodwill derived from the acquisition is not tax deductible.
The Group's profit for December 2016 include costs incurred from an acquisition in the amount of €0.6 million, the most significant of which is the €0.4 million asset transfer tax.
AutoCarrera contributed €4.4 million to the net sales of December. The impact on the comparable operating profit for the December was €-0.0 million, adversely impacted by the fair value allocations of inventories written off in the amount of €0.1 million. Management estimates that if the acquisition had been completed on 1 January 2016, the impact on the Group's net sales would have been approximately €45 million. The impact on the comparable operating profit would have been €2.2 million. When determining the amounts of net sales and comparable operating profit, management estimates that the fair values recognized at the date of acquisition would have been the same if the acquisition had been completed on 1 January 2016.
In 2015 Kesko Group did not have acquisitions to be accounted for as business combinations.
Disposals of assets
In July 2016, Kesko sold its shares in OOO Johaston and at the same time, disposed of the Intersport business in Russia.
In November 2016, Kesko sold the grocery business in Russia to Lenta Ltd. The aggregate consideration for the disposal was approximately €178 million, on which a €69 million comparable loss affecting comparability was recognised.
In 2015, Kesko sold the department store chain Anttila Oy to the German investment fund 4K INVEST at a price of €1 million. The date of the transaction was 16 March 2015. A €-130 million loss on the disposal affecting comparability was recorded on the transaction.
In 2015, Kesko, AMF Pensionsförsäkring and Ilmarinen established a joint real estate investment company. Kesko sold some of its store sites in both Finland and Sweden to the established joint venture. A €75.6 million selling profit affecting comparability was recorded.
In 2015, Kesko also sold four properties to Kesko Pension Fund. A €22.9 million selling profit affecting comparability was recorded.