Financial Statements

6.2 Business Combinations and Other Acquisitions

Acquisitions in 2013

Acquisitions are accounted for by the acquisition method, the results of the acquired businesses therefore being included in the consolidated financial statements as of the respective acquisition dates. The purchase prices of acquired companies domiciled outside the eurozone were translated at the exchange rates in effect at the respective acquisition dates.

Acquisition costs in 2013 amounted to €1,440 million (2012: €502 million). The purchase prices of the acquired ­companies or businesses were settled mainly in cash. Total goodwill of €801 million (2012: €190 million) arose on these acquisitions. It related principally to the following transactions:

On January 2, 2013, HealthCare wholly acquired the U.S. company Teva Animal Health Inc., headquartered in ­St. Joseph, Missouri. The acquisition broadens HealthCare’s range of anti-infective solutions for livestock and expands the existing product offering to include reproductive hormones. The transaction also adds ­dermatological products for companion animals, pet wellness products and nutraceuticals to the company’s portfolio. The parties agreed on a one-time payment of €38 million plus potential milestone payments, for which an amount of €45 million was included in the purchase price allocation. The milestone payments are mainly dependent on the achievement of various sales targets. The purchase price pertained mainly to product trademarks. Sales of €11 million were recorded since the acquisition date.

On January 18, 2013, CropScience acquired all the shares of PROPHYTA Biologischer Pflanzenschutz GmbH, a leading supplier of biological crop protection products headquartered in Malchow in the German state of Mecklenburg-­Western Pomerania. In addition to research and development facilities, the acquisition also includes state-of-the-art production and formulation facilities in the city of Wismar. A purchase price of €25 million was agreed, pertaining mainly to technologies, research and development projects and goodwill. In addition, two related distribution rights were acquired for €5 million. Sales of €4 million were recorded since the acquisition date.

On March 15, 2013, CropScience wholly acquired soybean seed producer Wehrtec Tecnologia Agricola Ltda. and the soybean business of Agricola Wehrmann Ltda. Both companies are headquartered in Cristalina in the Brazilian state of Goiás. This transaction strengthens the soybean research and development activities of CropScience and contributes to the development of varieties tailored to the requirements of Brazilian soybean growers. A purchase price of €34 million was agreed along with potential milestone payments of up to €11 million. The purchase price pertained mainly to marketable crop plants, breeding material and goodwill. Sales of €16 million were recorded since the acquisition date.

In June 2013, HealthCare successfully completed the tender offer for the shares of Conceptus, Inc., currently headquartered in Milpitas, California, United States, and acquired 100% of the outstanding shares. Conceptus, Inc. has developed Essure™, the only non-surgical permanent birth control method, which it markets in the U.S. and other countries. This acquisition enables Bayer to offer an even broader range of short-term, long-term and permanent contraceptive choices for women. A purchase price of €780 million was paid, pertaining mainly to technology and trademark rights. The goodwill remaining after the purchase price allocation is attributable to various factors, including significant cost savings in the marketing and sales functions along with general administration and infrastructure synergies. Sales of €74 million were recorded since the acquisition date.

In April 2013, the District Court of Berlin reached a decision in the court proceeding initiated by former minority stockholders of Bayer Pharma AG (formerly Bayer Schering Pharma AG) to review the adequacy of compensation payments made by Bayer in connection with the domination and profit and loss transfer agreement of 2006. The court decided that the compensation paid by Bayer at the time should be increased by about 40%. Bayer disagrees with this decision and has appealed. The potential supplementary payment represents a subsequent purchase price adjustment according to the March 31, 2004 version of IFRS 3 applicable at the acquisition date. Additional goodwill of €261 million, excluding interest, has been capitalized for this proceeding and for the parallel proceeding relating to the squeeze-out of the former minority stockholders.

On July 1, 2013, HealthCare acquired all the shares of Steigerwald Arzneimittelwerk GmbH, Darmstadt, Germany. ­Steigerwald holds a strong position in the German phytopharmaceuticals market, which is focused on pharmacy-only herbal medicines. Its product portfolio includes Iberogast™ for the treatment of functional gastrointestinal disorders and Laif™ for the treatment of mild to moderate depression. A purchase price of €218 million was agreed, pertaining mainly to product trademarks, technologies and goodwill. Sales of €33 million were recorded since the acquisition date.

On December 2, 2013, CropScience acquired the start-up company FN Semillas S.A. and its parent company Holding Manager S.A., both headquartered in Buenos Aires, ­Argentina. The necessary regulatory approvals are pending. FN Semillas S.A. specializes in the breeding, production and marketing of improved soybean seeds in Argentina. A purchase price of €25 million was agreed, pertaining mainly to commercial cultivars, germplasm and goodwill.

The purchase price allocations for FN Semillas S.A. and its parent company Holding Manager S.A. currently remain incomplete pending compilation and review of the relevant financial information. It is therefore possible that changes will be made in the allocation of the purchase price to the individual assets and liabilities. The measurement of deferred tax for the Conceptus group also currently remains incomplete. Adjustments may be offset against goodwill.

In 2013 the acquired businesses named above contributed €138 million (of which Conceptus: €74 million) to Bayer Group sales and minus €69 million (of which Conceptus: minus €26 million) to EBIT. Their total income after taxes since the respective dates of their first-time consolidation was minus €57 million (of which Conceptus: minus €25 million). This includes the financing costs incurred since the respective acquisition dates.

If these acquisitions had already been made as of January 1, 2013, the Bayer Group would have had total sales of €40,244 million (of which Conceptus: €120 million) in 2013. Income after taxes would have amounted to €3,171 million (of which Conceptus: minus €46 million), taking into account the effects of the hypothetical financing costs for the full year. Earnings per share would not have been materially affected.

The effects of these and other, smaller transactions made in 2013 – and of purchase price adjustments made in 2013 ­relating to previous years’ transactions – on the Group’s assets and liabilities are shown in the table. Net of acquired cash and cash equivalents, the transactions resulted in the following cash outflow:

Acquired Assets and Assumed Liabilities (Fair Values at the Respective Acquisition Dates)[Table 4.24]
2012 2013 Of which Conceptus, Inc.
€ million € million € million
Goodwill 190 801 475
Patents and technologies 254 400 338
Trademarks 15 281 45
R & D projects 80 64 28
Marketing rights 28
Production rights 4
Other rights 34 14
Software 14 1 1
Property, plant and equipment 13 55 14
Other noncurrent assets 1 1 1
Deferred tax assets 18 101 78
Inventories 36 59 24
Other current assets 15 45 33
Cash and cash equivalents 4 74 58
Provisions for pensions and other post-employment benefits (1) (9)
Other provisions (3) (16) (10)
Financial liabilities (1) (85) (83)
Other liabilities (14) (93) (76)
Deferred tax liabilities (151) (273) (160)
Net assets 502 1,440 780
Changes in non-controlling interest 1
Purchase price 502 1,441 780
Acquired cash and cash equivalents (4) (74) (58)
Liabilities for future payments (34) (295)
Payments for previous years’/quarters’ acquisitions 5 14
Net cash outflow for acquisitions 469 1,086 722

Acquisitions in 2012

In 2012 the following acquisitions were accounted for in accordance with IFRS 3:

On March 31, 2012, Bayer acquired the remaining 50% interest in the systems house joint venture Baulé S.A.S., France. This joint venture was formed in 2008 by MaterialScience and Michel Baulé S.A., which was later renamed ­EXIMIUM S.A.S. Baulé S.A.S. is a global leader in the development, formulation and processing of polyurethane cast elastomers. The purchase price of €50 million pertained mainly to customer relationships and goodwill. The income statement of Baulé S.A.S. was included in the consolidated financial statements by proportionate consolidation for the last time in the first quarter of 2012, whereas its assets and liabilities were already fully consolidated as of March 31, 2012. Following the purchase price allocation, the following assets and liabilities were recognized: goodwill (€39 million), other intangible assets (€55 million), other noncurrent assets (€3 million), inventories and other current assets (€21 million), cash and cash equivalents (€5 million), other liabilities (€8 million) and deferred tax liabilities (€16 million). The revaluation of mainly intangible assets that were previously held by the joint venture resulted in other operating income of €19 million. The fair value of the prior interest was €49 million at the time of the acquisition.

On July 2, 2012, CropScience acquired the watermelon and melon seed business of the U.S. company Abbott & Cobb Inc., headquartered in Feasterville, Pennsylvania. Abbott & Cobb has a robust position in the U.S. watermelon market, with increasing business in Mexico, Australia and Asia. The acquisition significantly strengthens the presence of ­CropScience in the watermelon and melon market. The melon seed business and the related germplasm add to its existing seed portfolio and provide the basis for new hybrids. A net purchase price of €43 million was agreed, pertaining mainly to germplasm, customer relations and goodwill.

On July 3, 2012, CropScience signed an agreement to purchase the U.S. company AgraQuest, Inc., headquartered in Davis, California. AgraQuest, Inc. is a global supplier of innovative biological pest management solutions based on natural microorganisms. It focuses on discovering, manufacturing and marketing highly effective products for biological pest and disease control to safeguard and increase crop production. The acquisition will help CropScience to build a leading technology platform for biological products and to further strengthen its strategically important fruit and vegetables business. A purchase price of €375 million was agreed, pertaining mainly to the technology platform and goodwill. This amount comprised a one-time payment and potential milestone payments with a total fair value of €31 million.

Last updated: February 28, 2014  Copyright © Bayer AG