(6) Acquisitions and divestments

(6) Acquisitions and divestments

Acquisitions in the fiscal year

Acquisition of Resolution Spectra Systems S.A.S., France

On June 30, 2020, the Group completed the acquisition of all of the shares in Resolution Spectra Systems S.A.S., a leading provider of systems for real-time analysis and monitoring of bioprocesses. The acquisition strengthens the Group’s bioprocessing product portfolio within the Life Science business sector. The purchase price comprised a fixed compensation of € 4 million and future sales-based milestone payments of up to € 4 million. The purchase price allocation was completed as of December 31, 2020. The intangible assets identified within the scope of purchase price allocation and recognized as of the initial consolidation date were attributable to technology-related intangible assets of € 4 million. Goodwill amounted to € 5 million. The impact on the Group’s net assets, financial position, and results of operations has been negligible both since actual inclusion in the consolidated financial statements and on the basis of notional consolidation from January 1, 2020.

Acquisition of AmpTec GmbH, Hamburg

On December 22, 2020, the Group acquired all of the shares in AmpTec GmbH (AmpTec), Hamburg, one of the leading contract development and manufacturing organizations for mRNA (messenger ribonucleic acid).

The deal strengthens the Group’s capabilities to develop and manufacture mRNA. The acquisition adds to the Group’s lipid manufacturing expertise and creates an integrated offering across the entire mRNA value chain. The company will be integrated into the Process Solutions business unit, which is part of the Life Science business sector. The preliminary purchase price comprised a payment of € 7 million and milestone payments of up to € 18 million for the achievement of technological development targets and sales- and profit-based targets. Valuation of the contingent purchase price payments resulted in a purchase price of € 13 million in accordance with IFRS 3. As the transaction took place just a few days before the reporting date, purchase price allocation had not yet been performed as of December 31, 2020. Accordingly, the difference between the purchase price and the carrying amounts of the net assets acquired is reported in full as goodwill in the amount of € 13 million. AmpTec has more than 40 employees and generated sales of € 2 million in fiscal 2020. The impact on the Group’s net assets, financial position, and results of operations has been negligible both since actual inclusion in the consolidated financial statements and on the basis of notional consolidation from January 1, 2020.

Acquisitions in the previous year

Acquisition of Versum Materials, Inc., United States

On April 12, 2019, the Group announced the conclusion of a final agreement to acquire all issued and outstanding shares of Versum Materials, Inc, (Versum) for US$ 53 per share in cash. The transaction closed on October 7, 2019. Its completion followed previous approvals issued by the relevant authorities, the approval of the shareholders of Versum and the fulfillment of other customary closing conditions.

Versum’s business activities

Versum was one of the world’s leading providers of process chemicals, gases, and equipment for semiconductor manufacturing. In fiscal 2018, the company generated annual sales of around € 1.2 billion in accordance with U.S. GAAP. It had around 2,300 employees and operated 14 production sites and seven research and development facilities in Asia and North America. The former Versum business was integrated into the Semiconductor Solutions business unit, which is part of the Performance Materials business sector. The objective of the transaction is to develop the Group as a leading player in the field of electronic materials for the semiconductor and display industries.

Due to the acquisition date, the Versum business acquired in fiscal 2019 contributed to the net income of the Group only from October 7, 2019.

Purchase price allocation

Determining the fair values required extensive analyses and calculations by an external professional. This process was completed in September 2020 and resulted in adjustments to intangible assets, property, plant and equipment and the associated deferred tax liabilities compared with the preliminary purchase price allocation in the 2019 financial statements. The changes in fixed assets were due in particular to the country-specific allocation of intangible assets, which in addition resulted in changes in the deferred taxes as a result of different national tax rates. There were also reclassifications within fixed assets. The final fair values at the acquisition date were as follows:

Material contingent liabilities were not identified as part of final purchase price allocation. The inventories measured at fair value were recognized in the cost of sales over a period of six months. The property, plant and equipment is depreciated over a period of up to 29 years. This resulted in depreciation of € 79 million in fiscal 2020 (2019: € 15 million).

The following overview shows the intangible assets identified within the scope of final purchase price allocation and recognized at the acquisition date:

Amortization of the intangible assets acquired amounted to € 220 million in fiscal 2020 (2019: € 55 million).

If customer relationships were one year longer, the fair value of the customer relationships recognized in intangible assets would be € 44 million higher on the date of their acquisition. A shortening of the customer relationships by one year would reduce their fair value by € 46 million. The positive difference of € 3,121 million was recognized as goodwill. It includes expected synergies resulting from the integration of Versum into the Group, expected revenues from technical innovations and developments that go beyond the current product, development, and customer portfolios, and unrecognized intangible assets such as the expertise of the workforce. The goodwill was allocated in full to the Performance Materials business sector. The goodwill is expected to be non-tax deductible. The change in goodwill valued in foreign currency between initial recognition and December 31, 2020 is broken down as follows:

Other acquisitions in the previous year

On June 17, 2019, the Group acquired the laboratory informatics provider BSSN Software GmbH, Darmstadt, (BSSN). BSSN develops and markets software for managing and integrating data, which unifies data from laboratory instruments and data systems and makes them available for analyzing, processing, and sharing. The business was integrated into the Applied Solutions business unit, which is part of the Life Science business sector. The purchase price amounted to € 16 million, including milestone payments amounting to € 6 million for reaching technological development targets. The first milestone payment of € 2 million was made in June 2020. The intangible assets identified within the scope of purchase price allocation and recognized as of the initial consolidation date were attributable to technology-related intangible assets of € 6 million.

The Group completed the acquisition of Intermolecular, Inc., United States, on September 20, 2019, for US$ 1.20 per share in cash (the equivalent of € 56 million for 100% of shares). Intermolecular possesses application-specific materials expertise and platforms for accelerated learning and experimentation with a powerful analysis infrastructure that complements the Group’s business and technology portfolio in the Semiconductor Solutions business unit, which is part of the Performance Materials business sector. In fiscal 2018, Intermolecular generated sales of US$ 34 million and had around 90 employees. Final purchase price allocation did not result in any changes compared with the preliminary purchase price allocation presented in the previous year’s annual report.

The Group completed the acquisition of FloDesign Sonics, Inc., United States, on October 10, 2019. The company developed a platform for industrial manufacturing of cell and gene therapies that allows cells to be manipulated using ultrasonic waves. It forms part of the Life Science business sector. The purchase price included fixed compensation of € 32 million. Future milestone payments of up to € 30 million for the achievement of technological development targets and an additional sales-based milestone payment were agreed as further elements of the purchase price. Taking into account the contingent purchase price payments, this resulted in a purchase price of € 46 million in accordance with IFRS 3. Final purchase price allocation did not result in any changes compared with the preliminary purchase price allocation presented in the previous year’s annual report.

Adjustments to the prior-year consolidated balance sheet due to completed purchase price allocation in fiscal 2020

The preliminary purchase price allocations for Versum and BSSN were completed in fiscal 2020. The consolidated balance sheet as of December 31, 2019 was retrospectively adjusted as follows:

The completion of purchase price allocation for the acquisitions made in previous year did not have any material effect on the consolidated income statement.

Divestments in the fiscal year

Divestment of the Allergopharma allergy business

On February 19, 2020, the Group signed an agreement to sell its Allergopharma allergy business to Dermapharm Beteiligungs GmbH, Grünwald, Germany. Following approval by the relevant regulatory authorities and other customary closing conditions, the transaction was closed effective March 31, 2020 with the exception of the immaterial business in China, which was closed separately on August 31, 2020. Allergopharma is a leading provider of specific immunotherapy for type 1 allergies. Allergopharma products were available in 18 countries. The transaction encompassed the Allergopharma business in Europe and Asia, including a wide range of therapeutic and diagnostic products, as well as the production site in Reinbek. An existing adrenaline autoinjector development project for the treatment of anaphylactic reactions did not form part of the transaction and remained with the Group. The final purchase price was € 70 million. After deducting the cash transferred, the Group received € 56 million. This was reported in the cash flow statement in cash flows from investment activities in the year under review. The gain on disposal in the amount of € 35 million was reported in other operating income in the consolidated income statement.

In the management’s estimation, the conditions for classification as a disposal group within the meaning of IFRS 5 were met only when the agreement on the divestment of the Allergopharma business was signed.

Divestment of Litec-LLL GmbH, Greifswald

The Group sold Litec-LLL GmbH on August 31, 2020 as part of a management buyout. The company specializes in lighting materials. The selling price was € 3 million; the gain on disposal and the cash received amounted to less than € 1 million.