for the year ended 30 September

Notes to the annual financial statements

 
29.   Acquisitions/transfers of businesses  
 

2011
Acquisition of Nashua franchises

With effect from 1 November 2010 Nashua Holdings purchased 51% of the Nashua Tygerberg and Nashua Paarl franchises for R10,6 million and R7,1 million respectively. The non-controlling shareholders of these two businesses provided R1,0 million of equity each.

With effect from 1 May 2011 the business and net assets of Nashua Durban were purchased by Nashua Holdings for R48,9 million. In terms of the agreement with the previous owners the balance of R47,8 million is payable six months after the acquisition date.

With effect from 1 June 2011 the business and net assets of Nashua Cape Town were purchased by Nashua Holdings for R67,0 million. In terms of the agreement with the previous owners the balance of R41,1 million is payable six months after the acquisition date.

The R41,1 million goodwill arising on these acquisitions is due to the price paid being in excess of all assets delivered, and represents the intrinsic value of the existing businesses to produce profits into the future. These purchases are in line with Nashua Office Automation’s strategy of acquiring a controlling share in all key existing franchise operations.

Acquisition of ECN

With effect from 1 June 2011 Reunert purchased the business and net assets of ECN for R171,9 million.

The goodwill of R107,8 million arising from the acquisition consists largely of the synergies expected from enhancing the group’s ability to provide fully converged communications solutions.

Acquisition of ITmatic

With effect from 1 July 2011 the business and net assets of ITmatic were purchased by CBI-electric: low voltage division of Reunert for R1,0 million.

The R13,9 million goodwill arose on the acquisition as ITmatic is a leading process control and automation systems integrator and the acquisition is set to accelerate the division’s growth into other foreign markets.

R0,7 million of acquisition related costs were incurred on the ECN transaction but were negligible in the other acquisitions.  

  Net assets acquired   A  
Nashua  
Paarl and  
West  
Coast  
Rm  
B  
Nashua  
Tygerberg  
Rm  
C  
Nashua  
Durban  
Rm  
D  
Nashua  
Cape  
Rm  
E  
ECN  
Rm  
F  
ITmatic  
Rm  
(A to F) 
Group  
Rm  
(E and F) 
Company  
Rm  
  Deferred taxation   (0,5)  (0,6)  (1,1)  (3,2)  (7,8)  –   (13,2)  (7,8) 
  Property, plant and equipment and intangible assets   2,5   3,2   6,4   16,5   67,4   1,0   97,0   68,4  
  Inventory   0,8   1,8   7,5   6,9   5,2   –   22,2   5,2  
  Accounts receivable1   3,3   4,4   27,0   39,5   49,5   4,8   128,5   54,3  
  Payables and provisions   (2,6)  (3,3)  (4,3)  (11,7)  (50,2)  (18,7)  (90,8)  (68,9) 
  Goodwill   3,6   5,1   13,4   19,0   107,8   13,9   162,8   121,7  
  Cost of investment   7,1   10,6   48,9   67,0   171,9   1,0   306,5   172,9  
  Profit/(loss) since acquisition   0,8   (0,7)  2,4   2,3   (0,6)  (0,3)  3,9   (0,9) 
  Revenue for the 12 months ended 30 September 2011                  
  as though the acquisition date had been 1 October 2010   27,3   37,5   106,3   154,6   397,4   65,2   788,3   462,6  
  Profit/(loss) for the 12 months ended 30 September 2011                  
  as though the acquisition date had been 1 October 2010   1,0   (0,8)  7,7   6,1   2,8   (7,4)  9,4   (4,6) 
 
1 Gross contractual amounts of accounts receivable at acquisition date 
3,3   4,4   27,0   39,5   49,5   4,8   128,5   54,3  
 
1 The best estimate of contractual cashflows of accounts receivable not expected to be received   
–   –   –   –   –   –   –   –  
   
  2010

Acquisition of Siemens Enterprise Communications

With effect from 1 November 2009 Reunert acquired the remaining 60% of the shares in Siemens Enterprise Communications (Pty) Limited (SEC). SEC supplies and maintains Siemens PABX’s to the South African market. This acquisition is expected to enhance Reunert’s position in this market by covering sectors not supplied by its existing offering through the Panasonic brand.

The 60% stake cost R12,2 million, paid for in cash, and Reunert provided R168,1 million in loan finance to fund its working capital on a short-term basis. The goodwill of R31,2 million arising from the acquisition consists largely of the synergies and economies of scale expected from enhancing the group’s PABX business. The company’s name has subsequently changed to Nashua Communications (Pty) Limited.

Transfer of Fuchs division of Reutech

With effect from 1 October 2009, the net assets of the business of Fuchs division of Reutech Limited were acquired by Reunert Limited at its net book value of R83,0 million.

Acquisition of shares in Moshate Technology Holdings

With effect from 1 October 2009 Reunert Limited sold 20% of its investment in Reutech Ltd to Moshate Technology Holdings (Pty) Limited in return for 100% of Moshate’s preference share capital, issued at R100,0 million (refer to
note 9.3).

Transfer of Pansolutions (Pty) Ltd

With effect from 1 December 2009, the net assets of the business of Pansolutions (Pty) Limited were acquired by Reunert Limited at its net book value of R67,5 million.  

  Net assets acquired   A  
SEC  
Rm  
B  
Fuchs  
Rm  
C  
Pan-  
solutions  
Rm  
D  
SEC  
Rm  
E  
Moshate  
Rm  
(A) 
Group  
Rm  
(B to E) 
Company  
Rm  
  Property, plant and equipment and intangible assets   23,7   12,2   2,4   –   –   23,7   14,6  
  Long-term accounts receivable (including short term portion of R53,8 million)1   100,6   –   –   –   –   100,6   –  
  Deferred taxation   7,2   1,0   –   –   –   7,2   1,0  
  Goodwill   31,2   –   53,7   –   –   31,2   53,7  
  IFRS 3 profit on acquisition   (8,2)  –   –   –   –   (8,2)  –  
  Inventory   36,1   37,7   9,5   –   –   36,1   47,2  
  Accounts receivable1   56,4   67,5   29,0   –   –   56,4   96,5  
  Other receivables   7,1   24,5   0,3   –   –   7,1   24,8  
  Taxation   6,2   –   –   –   –   6,2   –  
  Payables and provisions   (80,0)  (59,9)  (27,4)  –   –   (80,0)  (87,3) 
  Short-term borrowings   (168,1)  –   –   –   –   (168,1)  –  
  Shares purchased   –   –   –   12,2   100,0   –   112,2  
  Cost of investment   12,2   83,0   67,5   12,2   100,0   12,2   262,7  
  Profit/(loss) since acquisition   32,3   (2,8)  5,3       32,3   2,5  
  Revenue for the 12 months ended 30 September 2010 as though the acquisition date had been 1 October 2009   454,5   149,9   155,1       454,5   305,0  
  Profit/(loss) for the 12 months ended 30 September 2010 as though the acquisition date had been 1 October 2009   20,2   (2,8)  8,5       20,2   5,7  
  Acquisition date fair value of the equity interest held immediately prior to 1 November 2009   8,2           8,2    
  Gain recognised as a result of remeasuring to fair value the equity interest held before 1 November 2009   8,2           8,2    
 
1 Gross contractual amounts of accounts receivable at acquisition date 
176,5   67,6   30,4       176,5   98,0  
 
1 The best estimate of contractual cashflows of accounts receivable not expected to be received   
19,5   0,1   1,4       19,5   1,5