[3] Acquisitions

An acquisition is deemed to be significant if its total assets after the purchase price allocation (inclusive of goodwill) exceed EUR 50 m. The acquisition during the reporting period of American HomePatient, Inc. was a significant acquisition.

American HomePatient, Inc.

With effect from 1 February 2016, The Linde Group acquired 100 percent of the shares in US company American HomePatient, Inc. As from that date, the business was fully included in the consolidated financial statements of The Linde Group. The company specialises in respiratory therapies to serve the needs of patients with chronic obstructive pulmonary disease (COPD) and sleep apnoea. This acquisition will enable Linde to reinforce its market position in healthcare services and to achieve synergies with its existing business.

The transaction involved a cash payment of around EUR 210 m. After deducting a repayment of financial debt of EUR 24 m and provisions for employee remuneration of EUR 1 m and after taking account of a conditional purchase price repayment claim with an expected value of EUR 11 m, the acquisition cost as defined by IFRS 3 was EUR 174 m. The conditional purchase price repayment claim is due within two years. The amount of the repayment claim is uncertain and lies between EUR 1 m and EUR 36 m.

In the course of its purchase, Linde acquired non-current assets, inventories and current assets. Deferred tax assets arising from tax loss carryforwards have also been recognised, following the completion of an examination of the facts. This is the main reason for the decrease in goodwill compared with the figure disclosed in the half-year financial report. The principal elements of the provisional figure for goodwill of EUR 114 m are the expected synergies with Linde’s existing Healthcare business and going concern synergies. The purchase price allocation resulted in fair value adjustments of EUR 31 m. These relate to the company brand, customer relationships and tangible assets. None of the goodwill is tax-deductible. Due to the proximity of the acquisition date to the reporting date, the results of the purchase price allocation are still provisional.

In the course of the transaction, Linde acquired 100 percent of the shares in American HomePatient, Inc. Those non-controlling interests disclosed in the opening balance sheet are the result of pre-consolidated units with shares held by other non-controlling shareholders. The receivables acquired have a fair value of EUR 30 m and are all trade receivables. The gross value of the receivables is EUR 62 m. The difference between the gross value of the receivables and their fair value is a provision for bad debts. Since the date of the acquisition, the business acquired has generated revenue of EUR 177 m and a contribution to profit for the period of EUR 0 m. If the business had been consolidated into The Linde Group from 1 January 2016, the contribution to revenue would have been EUR 199 m and the contribution to profit for the period would have been a loss of EUR 2 m. The profit for the period was adversely affected in particular by the amortisation or depreciation of fair value step-ups identified in the course of the purchase price allocation.

Other acquisitions

In the first nine months of 2016, Linde made acquisitions to expand its industrial gases and Healthcare businesses in the EMEA and Americas segments. The total purchase price for these acquisitions was EUR 10 m, all of which was paid in cash. The total purchase price includes deferred payments. In some cases, separate transactions were conducted with former shareholders. In the course of these purchases, Linde acquired non-current assets and inventories. Total goodwill arising was EUR 7 m, while the purchase price allocations resulted in fair value adjustments of EUR 2 m. Of the goodwill, EUR 7 m is tax-deductible. The main components of the goodwill are potential synergies and access to new sales markets. No receivables were acquired in the course of these acquisitions.

Since the date of the acquisition, the businesses acquired have generated revenue of EUR 3 m and a contribution to profit for the period of EUR 0 m. If the businesses had been consolidated into The Linde Group from 1 January 2016, the contribution to revenue would have been EUR 7 m and the contribution to profit for the period would have been EUR 0 m.

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Impact of acquisitions on the net assets of the Linde Group

Opening balance upon initial consolidation

 

Fair value

in € million

 

AHOM

 

Other

Non-current assets

 

148

 

3

Inventories

 

4

 

1

Other current assets

 

34

 

Cash and cash equivalents

 

7

 

 

 

 

 

 

Equity

 

60

 

3

Non-controlling interests

 

10

 

Liabilities

 

123

 

1