Notes to the consolidated financial statements
Notes contents29. Business combinations
On 15 April 2009 the Group acquired Wall Street English (WSE), China's leading provider of premium English language training to adults. On 15 July 2009 the Group completed the purchase of an additional stake in Maskew Miller Longman (MML), its South African publishing business. Provisional values for the assets and liabilities arising from these and other acquisitions completed in the year together with adjustments to prior year acquisitions are as follows:
2009 | 2008 | ||||||
---|---|---|---|---|---|---|---|
All figures in £ millions | Notes | Wall Street English Fair value | MML Fair value | Other Fair value | Total Fair value | Total Fair value | |
Property, plant and equipment | 10 | 6 | 1 | 2 | 9 | 6 | |
Intangible assets | 11 | 40 | 47 | 55 | 142 | 220 | |
Intangible assets – Pre-publication | 20 | – | – | 2 | 2 | 27 | |
Inventories | 1 | 12 | 1 | 14 | 7 | ||
Trade and other receivables | 8 | 7 | 8 | 23 | 54 | ||
Cash and cash equivalents | 3 | 9 | 17 | 29 | 16 | ||
Trade and other liabilities | (56) | (16) | (19) | (91) | (52) | ||
Current income tax liabilities | – | (2) | (2) | (4) | (3) | ||
Net deferred income tax liabilities | 13 | (9) | (12) | (24) | (45) | (4) | |
Provisions for other liabilities and charges | – | – | – | – | (26) | ||
Retirement benefit obligations | – | – | (1) | (1) | – | ||
Minority interest | – | (7) | (9) | (16) | (2) | ||
Assets held for sale | – | – | – | – | 3 | ||
Net assets/(liabilities) acquired at fair value | (7) | 39 | 30 | 62 | 246 | ||
Goodwill | 11 | 108 | 38 | 59 | 205 | 153 | |
Increase in fair values of proportionate holding arising on stepped acquisition | – | (23) | – | (23) | – | ||
Total | 101 | 54 | 89 | 244 | 399 | ||
Satisfied by: | |||||||
Cash | (101) | (49) | (51) | (201) | (394) | ||
Other consideration | – | (5) | – | (5) | – | ||
Deferred consideration | – | – | (27) | (27) | – | ||
Net prior year adjustments | – | – | (11) | (11) | (5) | ||
Total consideration | (101) | (54) | (89) | (244) | (399) | ||
Carrying value of net (liabilities)/assets acquired | (22) | 5 | 2 | (15) | 78 | ||
Fair value adjustments | 15 | 34 | 28 | 77 | 168 | ||
Fair value | (7) | 39 | 30 | 62 | 246 |
The goodwill arising on these acquisitions results from substantial cost and revenue synergies and from benefits that cannot be separately recognised, such as the assembled workforce.
Wall Street English:
All figures in £ millions | Carrying value | Fair value adjustments | Fair value |
---|---|---|---|
Property, plant and equipment | 6 | – | 6 |
Intangible assets | 16 | 24 | 40 |
Inventories | 1 | – | 1 |
Trade and other receivables | 8 | – | 8 |
Cash and cash equivalents | 3 | – | 3 |
Trade and other liabilities | (56) | – | (56) |
Net deferred income tax liabilities | – | (9) | (9) |
Net liabilities acquired | (22) | 15 | (7) |
Goodwill | 108 | ||
Total | 101 |
MML:
All figures in £ millions | Carrying value | Fair value adjustments | Fair value |
---|---|---|---|
Property, plant and equipment | 1 | – | 1 |
Intangible assets | – | 47 | 47 |
Inventories | 12 | – | 12 |
Trade and other receivables | 7 | – | 7 |
Cash and cash equivalents | 9 | – | 9 |
Trade and other liabilities | (16) | – | (16) |
Current income tax liabilities | (2) | – | (2) |
Net deferred income tax liabilities | 1 | (13) | (12) |
Minority interest | (7) | – | (7) |
Net assets acquired | 5 | 34 | 39 |
Goodwill | 38 | ||
Increase in fair values of proportionate holding arising on stepped acquisition | (23) | ||
Total | 54 |
Net cash outflow on acquisition:
All figures in £ millions | 2009 | 2008 |
---|---|---|
Cash – Current year acquisitions | (201) | (394) |
Cash – Acquisitions yet to complete | (4) | (12) |
Deferred payments for prior year acquisitions and other items | (32) | (5) |
Cash and cash equivalents acquired | 29 | 16 |
Cash outflow on acquisition | (208) | (395) |
Wall Street English contributed £29m of sales and £nil to the Group's profit before tax between the date of acquisition and the balance sheet date. MML contributed £22m of sales and £4m to the Group's profit before tax between the date of acquisition and the balance sheet date. Other businesses acquired contributed £37m to the Group's sales and £6m to the Group's profit before tax between the date of acquisition and the balance sheet date.
If the acquisitions had been completed on 1 January 2009, the Group estimates that sales for the period would have been £5,658m and profit before tax would have been £662m.