Note 38 – Acquisitions
Biopac UK Ltd
On February 8 2018, Duni acquired 75% of the shares in Kindtoo Ltd, which is marketed under the name Biopac UK Ltd, from the entrepreneurs Mark Brigden and Eric Grayham. Biopac is a leading supplier of sustainable packaging for food and beverages in the UK. As from and including February 2018, the company is consolidated in the Meal Service business area.
Biopac has 12 employees and annual sales of approximately SEK 55 m, with an operating margin well in line with the Meal Service business area. The entrepreneurs will continue to play an active role in the company. 90% of the purchase price will be paid in cash in conjunction with the acquisition and the remaining amount will be paid in accordance with the established acquisition balance sheet. The total purchase price amounts to approximately SEK 22 m for 75% of the company’s shares. The same amount is carried to Duni’s interest-bearing net debt, and is covered by the existing facility. A preliminary specification of the acquisition, including other acquisition-related information, will be provided in the interim report for Q1 2018.
On May 3, 2017, Duni acquired a total of 80% of the shares of New Zealand company United Corporation Limited, which is traded under the name Sharp Serviettes. Sharp Serviettes is a leading manufacturer and supplier of napkins as well as food hygiene and serving products in New Zealand. The company is consolidated in the New Markets business area as from and including May 2017.
Sharp Serviettes has 45 employees and has its production unit in western Auckland with distribution across New Zealand. The company is a leading supplier of table setting products in and was also already a Duni product distributor before the acquisition. Sharp Serviettes is a well-reputed partner in the HoReCa industry and retail sector in New Zealand. The company offers a wide range of quality products that can be adapted to customer requirements. Sharp Serviettes values short lead times and manufactures to order, to maintain high delivery performance.
The purchase price of SEK 59 m was paid in cash in connection with the takeover, and SEK 47 m of the purchase price was for the shares in the company, while SEK 12 m was to redeem loans. The purchase impacted Duni’s interest-bearing net debt in the amount of SEK 59 m, which is accommodated within the current loan facility. The acquisition costs affect the net income for 2017 under the item “Other operating expenses” and amount to SEK 1.7 m. In accordance with RFR2, the Parent Company recognizes these costs as financial fixed assets.
Duni has an obligation to acquire the remaining 20% of the shares. The minority owners of United Corporation Limited have a a put option in the April-June period for 2019, 2020 and 2021. In the event that the option is exercised, the purchase price will be based on the Company’s normalized average financial performance for the two closed financial years preceding the date the option is exercised. As a result of the option, Duni recognizes a non-controlling interest and allocates the interest’s share of the income to the interest. The Group also recognizes a liability corresponding to the discounted expected redemption price for the options with elimination of the non-controlling interest attributable to the option. The difference between the liability for the option and the non-controlling interest to which the option relates is recognized directly in equity and separated from other changes in equity.
The fair value of 100% of the net assets amounts to SEK 59 m. Intangible fixed assets primarily consist of customer contracts. Goodwill corresponds to the synergy effects within purchasing and access to another production unit and thus a stronger platform for Duni in Asia and Oceania. No part of the recognized goodwill or intangible fixed assets is expected to be deductible in conjunction with income taxation.
During the period May 1–December 31, 2017, Sharp Serviettes contributed SEK 39 m to the Group’s net sales and SEK 2 m to income after tax and amortization on customer relations. Had Sharp Serviettes been consolidated as from January 1, 2017, Duni’s income statement would have shown additional revenues of SEK 17 m and SEK 1 m in income after tax including amortization on customer relations.
|Acquired net assets||SEK k, Fair value|
|Intangible fixed assets||19 872|
|Tangible fixed assets||6 816|
|Accounts receivable||5 665|
|Long-term loans||-12 878|
|Accounts payable||-3 040|
|Deferred tax liabilities||-5 814|
|Tax liabilities||-1 026|
|Other short-term liabilities||-406|
|Acquired identifiable net assets||21 804|
|Non-controlling interests||-11 702|
|Acquired net assets||46 806|
Terinex Siam Co.Ltd.
On August 17, 2016, Duni acquired in total 60% of the shares in the Thai company, Terinex Siam Co. Ltd., a market leading manufacturer and supplier of napkins and single-use products for food. Terinex Siam focuses on the HoReCa market in Southeast Asia, with key markets primarily in Thailand, Singapore and Australia. The product range includes napkins and single-use packaging solutions for food as well coasters and aluminum foil.
|Adopted acquisition analysis at December 31, 2016:|
|Acquired net assets||SEK k, Fair value|
|Intangible fixed assets||46 355|
|Tangible fixed assets||23 028|
|Other long-term receivables||132|
|Other financial receivables||496|
|Net deferred tax asset/liability||-9 067|
|Current tax||-1 995|
|Accounts receivable||10 382|
|Other current receivables||1 655|
|Deferred income and prepaid expenses, net||-1 801|
|Cash and cash equivalents||10 325|
|Accounts payable||-1 795|
|Other short-term liabilities||-5 370|
|Acquired identifiable net assets||84 413|
|Non-controlling interests||-75 471|
|Acquired net assets||113 207|
Terinex Siam has more than 100 employees within production, logistics and sales. The company is based on the outskirts of Bangkok and, in 2015, reported sales of THB 345 m with an operating margin in excess of 20%. The acquisition has been consolidated in the New Markets business area.
Duni acquired 49% of the shares directly and 11% indirectly via a joint-venture company in Thailand. The purchase price of THB 462 m was paid in cash in connection with the takeover and SEK 113 m was charged to Duni’s interest-bearing net debt, which is accommodated within current loan agreements. The acquisition costs affect net income for the year under the item “Other operating expenses” and amount to SEK 5 m. In accordance with RFR2, the Parent Company recognizes these costs as financial fixed assets.
Duni has chosen to recognize non-controlling interests at fair value. For more information regarding accounting principles, see Note 2. The fair value of 100% of the net assets amounts to SEK 84 m. Intangible fixed assets primarily consist of customer contracts. Goodwill corresponds to the synergy effects in purchasing and that Duni now has its own production unit in Asia. Together with Terinex Siam, Duni will be able to benefit from existing/overlapping distribution channels and jointly develop the product range and customer portfolio. No part of the recognized goodwill or intangible fixed assets is expected to be deductible in conjunction with income taxation.
Accounts receivable and other current receivables correspond to the contractual amounts since it is expected that all accounts receivable and other short-term receivables are recoverable.
During the period August 1–December 31, 2016, Terinex Siam contributed SEK 36 m to the Group’s net sales and SEK 5 m to income after tax and amortization on customer relations, but before the minority’s share. The minority’s share of income amounted to SEK 2 m. Had Terinex Siam been consolidated as from January 1, 2016, Duni’s income statement would have shown additional revenues of SEK 47 m and SEK 5 m in income after tax and amortization on customer relations but before the minority’s share.
|Effect on cash flow – acquisition of subsidiaries, SEK m||2017||2016|
|Cash purchase price||-47||-113|
|Less cash and cash equivalents||1||10|
|Paid purchase price||-46||-103|
|Redemption of loans||-12||–|
|Supplemental purchase price, Duni Song Seng*||–||-21|
|Total effect on cash flow||-58||-124|
|* During the year, a supplemental purchase price was paid in respect of Duni Song Seng, which was acquired in 2013.|