4Nederlandse tekst
Effect of business combinations
The establishment of Bridon-Bekaert Ropes Group
On 7 December 2015, Bekaert announced the signing of an agreement with Ontario Teachers’ Pension Plan (Ontario Teachers’), the owner of Bridon, to establish Bridon-Bekaert Ropes Group, a new joint venture in which Bekaert and Ontario Teachers’ planned to hold respectively 67% and 33%. The new group combines the ropes and advanced cords businesses including 19 manufacturing entities across 11 countries, market-focused R&D, and a global sales and service network.
On 28 June 2016, Bekaert and Ontario Teachers’ successfully closed the definitive merger of the ropes and advanced cords businesses of Bekaert and Bridon. Bekaert is contributing its advanced cords business and a well-established ropes presence in Latin America, Canada and Australia. Bridon holds strong positions in Europe and the USA with a portfolio of rope wire, strand and steel and synthetic ropes. The merger will allow for both operational and commercial synergies. The complementary geographic and sector profiles should enable growth ahead of the market; the combination of rope technology strength and wire technology strength will provide a platform for strong differentiation in the high-end rope markets. The merger creates the leading ropes group in the world with approximately USD 650 million in sales (current equivalent of € 580 million) on an annual basis in a normalized business context. The group is estimated to add approximately USD 350 million (€ 315 million at current rates) to Bekaert’s consolidated sales on an annual basis in a normalized business context. The Group projects a lower run rate over the first two years due to the current demand instability in oil and gas and mining markets.
- Bekaert has entered the following entities in Bridon-Bekaert Ropes Group: the WRI roperies in Canada, US and Australia, Bekaert Cimaf of Brazil, Prodinsa in Chile, Procables in Peru and its advanced cord businesses in Aalter (Belgium) and Shenyang (China). The commercialization of the ropes activities integrated in Bekaert’s wire plants in Qingdao (China) and Shah Alam (Malaysia) will as from now also be managed by the new group. About 1 000 people have joined Bridon-Bekaert Ropes Group.
- Ontario Teachers’ has contributed its entire ownership in Bridon to Bridon-Bekaert Ropes Group, which includes the wire and steel and fiber rope manufacturing facilities in Doncaster, Newcaste, and Coatbridge (UK), in Exeter, Hanover and Wilkes Barre (PA, USA), in Gelsenkirchen (Germany), Hangzhou (China), Jakarta (Indonesia) and the ScanRope plant in Tønsberg (Norway). Also all commercial and service centers worldwide have been integrated into the new group. About 1 500 people have joined Bridon-Bekaert Ropes Group.
The initial accounting for the business combination presented in these interim financial statements is provisional, since the acquisition has only been closed at the end of the first semester. On such short notice it proved impossible to organize and complete full-fledged fair value appraisals of all assets acquired, liabilities assumed and contingent liabilities identified. Therefore, the purchase price allocation has provisionally been based on the accounting values on the books of the acquirees, which reflect negative net assets totaling € -107 million. The main reason for this lies with Bridon’s highly leveraged financing structure, the acquired net debt amounting to € 297.6 million.
The non-controlling interest arising on the acquirees have provisionally been measured at their share in the book value of the net assets acquired.
Since the purchase consideration consisted of a 33% stake in Bekaert’s advanced cords and global ropes businesses, it is measured at the fair value of the non-controlling interests disposed, which is based on the valuation of the shares that was agreed between the partners.
The accounting for the business combination resulted in a provisional goodwill of € 124.2 million, which mainly reflects the importance for Bekaert of reinforcing its global competitive position through this deal.
The table below presents the net assets acquired by balance sheet caption, before the effect of fair value adjustments applied in accordance with IFRS 3, ‘Business combinations’, and the goodwill calculation. It also clarifies the amount shown in the consolidated cash flow statement as ‘new business combinations’.
Total
in thousands of € |
Acquiree's
carrying amount
before
combination |
Fair value
adjustments |
Fair value |
| Intangible assets |
46 637 |
- |
46 637 |
| Property, plant and equipment |
118 688 |
- |
118 688 |
| Deferred tax assets |
911 |
- |
911 |
| Non-current loas and receivables |
123 |
- |
123 |
| Other non-current assets |
6 707 |
- |
6 707 |
| Inventories |
54 195 |
- |
45 195 |
| Trade receivables |
38 281 |
- |
38 281 |
| Advances paid |
20 |
- |
20 |
| Other receivables |
7 324 |
- |
7 334 |
| Short-term deposits |
5 857 |
- |
5 857 |
| Cash and cash equivalents |
29 830 |
- |
29 830 |
| Other current assets |
5 481 |
- |
5 481 |
| Non-current employee benefit obligations |
-4 273 |
- |
-4 273 |
| Non-current provisions |
-13 152 |
- |
-13 152 |
| Non-current interest-bearing debt |
-301 887 |
- |
-301 887 |
| Deferred tax liabilities |
-25 816 |
- |
-25 816 |
| Other non-current liabilities |
-16 |
- |
-16 |
| Current interest-bearing debt |
-25 651 |
- |
-25 651 |
| Trade payables |
-24 437
|
- |
-24 437 |
| Current employee benefit obligations |
-2 995 |
- |
-2 995 |
| Current provisions |
-1 188 |
- |
-1 188 |
| Income taxes payable |
-407 |
- |
-407 |
| Advances received |
-979 |
- |
-979 |
| Other current liabilities |
-14 583 |
- |
-14 583 |
| |
|
|
|
| Total net assets acquired in the business combination |
107 187 |
- |
107 187 |
| Non-controlling interests disposed |
-46 480 |
-5 820 |
-52 300 |
| Non-controlling interests arising on the acquirees |
35 315 |
- |
35 315 |
| Goodwill |
|
|
124 172 |
| Consideration paid in cash |
|
|
0 |
| Cash acquired |
|
|
29 830 |
| New business combinations |
|
|
29 830 |
Since the closing date of the acquisition was 28 June, the 30 June financials were used for the opening balance at the acquisition date, and no income statement effects were recognized other than the acquisition-related expenses incurred.
The acquisition-related expenses, which consisted mainly of consultancy fees, amounted to € 6.3 million and were included in non-recurring items.