Lenovo 2013 Annual Report Download - page 181

2012/13 Annual Report Lenovo Group Limited 179
37 Business combinations (continued)
(a) Set forth below is the calculation of goodwill*:
Stoneware EMC JV CCE Total
US$’000 US$’000 US$’000 US$’000
Purchase consideration
– Cash paid (i) 43,756 58,813 102,493 205,062
– Fair value of consideration shares (ii) – – 43,331 43,331
– Less: cash and consideration shares
to be recovered – – (74,318) (74,318)
– Present value of contingent considerations (iii) 1,238 41,550 – 42,788
– Present value of deferred consideration (iii) 2,148 – – 2,148
Total purchase consideration 47,142 100,363 71,506 219,011
Less: Fair value of net assets/(liabilities) acquired 11,589 48,716 (42,563) 17,742
Goodwill (iv), (Note 17(c)) 35,553 51,647 114,069 201,269
* The calculations of goodwill for Stoneware and CCE are preliminary.
(i) Included in the cash paid is a settlement of notes payable on behalf of the former Stoneware shareholders on
the closing date, which amounted to US$13,886,000. Cash paid for acquisition of CCE is net of an amount of
US$30,987,000 to be recovered in 2013 according to the relevant sales and purchase agreement (the “SPA”).
(ii) The fair value of 46,875,000 ordinary shares of the Company issued as part of the purchase consideration for the
business combinations of CCE were based on the published share price on January 2, 2013. Shares consideration
paid is expected to be fully recovered by the Company according to the SPA and the relevant closing document.
(iii) The contingent consideration arrangement requires the Group to pay in cash to the then respective shareholders
with reference to certain performance indicators. The present value of deferred and contingent considerations is
included in other non-current liabilities in the balance sheet (Note 29).
Deferred consideration will be paid to certain former Stoneware shareholders in 2016.
(iv) The amounts of goodwill from the business combinations in respect of Stoneware and CCE that are expected to
be deductible for tax purpose are US$25 million and US$97 million respectively.
(b) The major components of assets and liabilities arising from the business combination activities are as follows:
Stoneware EMC JV CCE Total
US$’000 US$’000 US$’000 US$’000
Cash and cash equivalents 2,896 10,000 24,127 37,023
Property, plant and equipment 42 425 7,178 7,645
Deferred tax assets less liabilities 592 (6,022) (16,589) (22,019)
Intangible assets 13,000 36,500 49,667 99,167
Net working capital except cash and
cash equivalents (2,926) 7,813 (91,473) (86,586)
Non-current liabilities (2,015) – (15,473) (17,488)
Fair value of net assets/(liabilities) acquired 11,589 48,716 (42,563) 17,742
Intangible assets arising from the business combination activities mainly represent customer relationships, trademarks
and brand licenses. The Group has engaged external valuers to perform fair value assessments on these intangible
assets in accordance with HKAS 38 “Intangible Assets” and HKFRS 3 (Revised) “Business Combinations”.
At March 31, 2013, the Group has not finalized the fair value assessment for net assets acquired (including intangible
assets) from the business combination activities in respect of Stoneware and CCE. The relevant fair values of net assets
stated above are on a provisional basis.
Acquisition-related costs incurred in connection with these business combination activities of approximately US$5.7
million have been recognized as administrative expenses in the consolidated income statement.