Merck 2014 Annual Report Download - page 97

92 GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Course of business and economic position
The total assets of the Group amounted to €26,010 million as of
December 31, 2014. This represents an increase of €5,192 million
or 24.9 % over December 31, 2013 (€20,819 million). This sharp
increase was primarily attributable to the following developments:
The issue of a hybrid bond with a volume of €1.5 billion as
well as higher other financial liabilities led in 2014 to an increase
of around €1.9 billion in liquid assets as well as financial liabili-
ties, which relates to the financing of the planned acquisition of
Sigma-Aldrich. Currency hedging transactions completed for the
expected purchase price payment in U.S. dollars for the acquisi-
tion of Sigma-Aldrich in 2015 resulted in high positive market
values that increased equity without affecting profit or loss as of
December 31, 2014.
Within the scope of the global alliance entered into with Pfizer
Inc., USA, in November 2014 on the development and commer-
cialization of the anti-PD-L1 antibody, the Group received an
upfront payment of US$ 850 million (€678 million). Based on the
collaboration agreement, the Group will co-market Xalkori®, a
drug for the treatment of non-small cell lung cancer, with Pfizer
in the United States and certain other major markets over a multi-
year period. Other current assets of €294 million were capitalized
for the entitlement to the right.
Both the upf ront payment received
and the value of the right to co-market Xalkori® were recognized
in the balance sheet as deferred revenues under other liabilities,
leading to an increase of nearly €1 billion in the balance sheet
total as of December 31, 2014.
Owing to a weaker euro, positive foreign exchange effects
resulted, which increased total assets by around €0.9 billion as of
December 31, 2014.
The first-time consolidation of AZ as of May2, 2014 also had an
effect on the consolidated balance sheet as of December 31, 2014.
As part of the purchase price allocation for the AZ acquisition, the
acquired assets and liabilities were measured at fair values in the
balance sheet. On the date of first-time consolidation, this led to
an increase in intangible assets (excluding goodwill) by €1,051
million. The goodwill from the transaction amounted to €818 mil-
lion. The payment of the purchase price totaling €1,875 million
was made fully in cash. Further information on the purchase price
allocation for the AZ acquisition can be found under “Acquisitions
and divestments as well as assets held for sale and disposal
groups” in the Notes to the Group accounts.
Equity increased by €732 million to €11,801 million (2013:
€11,069 million). This increase was mainly driven by total com-
prehensive income generated in 2014 (see the Consolidated State-
ment of Comprehensive Income in the consolidated financial
statements). This was countered by dividend payments, the result
transfer to E.Merck KG, Darmstadt, Germany,as well as the acqui-
sition of the non-controlling interests in AZ Electronic Materials
S.A. (see Consolidated Statement of Changes in Net Equity in the
consolidated financial statements). Owing to the sharp increase in
the balance sheet total, the equity ratio declined to 45.4 % as of
December 31, 2014 (2013: 53.2 %).
The doubling of pension provisions to € 1.8billion resulted
mainly from the lowering of the discount rates used to calculate
the present value of the defined benefit obligations of old-age
pension plans. The resulting actuarial losses were recognized in
the Consolidated Statement of Comprehensive Income and, taking
into account deferred taxes, lowered the equity of the Group.