Aviva 2007 Annual Report Download - page 139
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3 – Subsidiaries continued
The acquisition of the initial 5% shareholding has given rise to goodwill on acquisition of £2 million, calculated as follows:
Purchase cost:
£m
Cash paid 8
Attributable costs 1
Total consideration 9
The book and fair values of the assets and liabilities at the date of acquisition were:
£m
Assets
Intangible assets 202
Other assets –
Total assets 202
Liabilities
Deferred tax on acquired assets (60)
Total liabilities (60)
Total net assets 142
Net assets acquired (initial 5% share) 7
Goodwill arising on acquisition of this holding 2
The value of the agreement to distribute through Cajamurcia’s branch network has been identified as a separate
intangible asset with a value of £202 million, using estimated post-tax cash flows and discount rates.
As noted above, the results of Cajamurcia Vida have been included in the consolidated financial statements of the
Group and have contributed £nil to the consolidated profit before tax since it began trading on 30 November 2007.
(iii) Italian transactions with Banco Popolare
During the year, the Group’s Italian holding company has entered into three sets of transactions with an Italian bank,
Banco Popolare Societa Cooperativa (Banco Popolare). Details of these transactions are as follows :
(a) Petunia and Banca Network
On 18 September 2007, the Group made a capital contribution of £19 million to Petunia SpA (Petunia), an investment
holding company, previously held as a financial investment. The Group’s holding in Petunia has increased to 40.62% but,
as the Group has 51% of voting rights and management control, the Group has consolidated this company as a
subsidiary. The total capitalisation of the company at this date was £47 million, which was used to purchase a 49.75%
stake in Banca Bipielle Network SpA, an Italian distribution network, from Banco Popolare on 26 September 2007. The
acquired company has since been renamed Banca Network Investimenti SpA (Banca Network).
The Group does not have management control of Banca Network and so accounts for it as an investment in an associate.
The total consideration was £49 million, comprising cash consideration of £46 million and contingent consideration of
£3 million (representing the present value of future expected performance-related consideration). The fair value of the
Group’s share of Banca Network’s identifiable net assets at the date of acquisition was £27 million. The residual goodwill
of £22 million has been included in the carrying value of the investment in associate (see note 19).
This residual goodwill has been calculated based on the provisional fair values of the net assets and liabilities of Banca
Network, and may be restated in 2008, in accordance with paragraph 62 of IFRS 3, Business Combinations.
(b) Area Life
On 26 September 2007, the Group acquired a 55% stake in Area Life International Assurance Limited (Area Life), a life
assurance company based in Ireland, selling exclusively to Italian residents, from Banco Popolare for £7 million.
This acquisition has not given rise to any goodwill on acquisition. The relevant calculation is as follows:
Purchase cost:
£m
Cash paid 7
Aviva plc
Annual Report and
Accounts 2007
135
Financial
statements