Annual Report 2017

6. Acquisitions of Subsidiaries, Associates and Non-Controlling Interests

The following acquisitions and adjustments to the purchase price allocation were done in 2017.
Visilab S.A.

In October 2017 the Group increased its shareholding in Visilab S.A., from 30% to 60%. Before the transaction, Visilab S.A. was an associate of GrandVision. As part of this agreement, the parties have agreed that GrandVision’s shareholding will increase, in two steps, to 79% in 2019. At acquisition date, Visilab S.A. had two chains named Visilab and Kochoptik, that operate in total 98 stores throughout Switzerland. With this acquisition the Group is broadening its footprint in Europe. The Company paid €67,136 (CHF 76,899) in cash and recognized a total contingent consideration to the value of €37,922 (CHF 43,846) relating to its obligation to increase its shareholding by a further 19% in two steps in 2018 and 2019.

This contingent consideration has been included in Trade and Other Payables (note 33) and Other Non-Current Liabilities (note 31) respectively. The contingent consideration is calculated using an EBITDA multiple based on the Group's best estimate of the achievement of agreed business targets by Visilab S.A., adjusted for the time value of money.

Based on the initial purchase price allocation an amount of €104,853 (CHF 121,232) is identified as provisional goodwill and represents the future synergies, workforce and expected growth and profitability of the business. The purchase price allocation has been largely completed. Visilab forms part of the Other Europe segment.

Included in the Income Statement is a gain on remeasuring the Group's previously held equity interest (Associate) in Visilab S.A. to fair value at acquisition date of €37.9 million.

For the non-controlling interests in Visilab S.A., the Group elected to recognize the non-controlling interests at its proportionate share of the fair value of the acquired net identifiable assets.

Tesco Opticians

In the G4 segment, the Group acquired Tesco Opticians in December 2017 through its United Kingdom business, Vision Express. The acquisition incorporates Tesco Opticians' network of 209 optical stores across the United Kingdom and Ireland. With this acquisition the Group further strengthened its market position in the United Kingdom. The Group paid €61,802 (GBP 55,236) in cash for the acquisition of the assets consisting mainly of the customer database and a right to open additional optical stores in the Tesco store network. In addition, the Group recognized contingent consideration to the value of €5,595 (GBP 5,000), relating to its obligation to pay an additional amount in 2018 based on the achievement of agreed business targets.

This contingent consideration has been included in Trade and Other Payables (note 33). The contingent consideration is based on the Group's best estimate of the achievement of agreed business targets, adjusted for the time value of money.

Based on the initial purchase price allocation an amount of €11,354 (GBP 10,148) was identified as provisional goodwill. The goodwill is attributable to the workforce and expected synergies following the integration of the acquired business into our existing organization. The purchase price allocation has been largely completed.

Store and chain acquisitions

During 2017 the Group acquired 21 stores in the segments G4 and Other Europe. With these acquisitions the Group further strengthened its market position within the respective regions. After the initial allocation of the consideration transferred for the acquisitions of the assets, liabilities and contingent liabilities in 2017, an amount of €2,893 was identified as provisional goodwill. The goodwill is attributable to the expected synergies following the integration of the acquired businesses into our existing organization. The goodwill mainly comprises the skilled employees and the locations of the acquired stores and chain, which cannot be recognized as separately identifiable assets.

Adjustments to purchase price allocation

In 2017 the Group finalized the purchase price allocation for Optica Lux in Uruguay, the small points of sale acquired from Walmart Mexico and other acquisitions done in 2016. This did not result in a change in the value of recognized goodwill.

in thousands of EUR

Notes

Visilab

Tesco
Opticians

Store, chain acquisitions and adjustments to purchase price allocation

Total

Property, plant and equipment

13

23,848

299

672

24,819

Other intangibles assets

15

95,651

67,909

3,105

166,665

Deferred income tax assets

27

6,525

-

8

6,533

Investments in Associates

18

233

-

-

233

Other non-current assets

1,236

-

-

1,236

Inventories

13,729

853

389

14,971

Trade and other receivables

6,753

-

102

6,855

Cash and cash equivalents

3,794

-

35

3,829

Deferred income tax liabilities

27

- 21,705

- 9,782

- 309

- 31,796

Other non-current liabilities

- 1,713

-

-

- 1,713

Retirement benefit obligations

28

- 23,887

-

-

- 23,887

Non-controlling interest

- 368

-

-

- 368

Non-current borrowings

26

- 321

-

-

- 321

Trade and other payables

- 20,506

- 3,236

- 121

- 23,863

Current income tax liabilities

- 2,151

-

-

- 2,151

Current borrowings

26

- 12,974

-

-

- 12,974

Total identifiable net assets and liabilities at fair value

68,144

56,043

3,881

128,068

Consideration paid in cash and cash equivalents

67,136

61,802

6,774

135,712

Cash and cash equivalents and bank overdrafts at acquired subsidiary

- 3,794

-

- 35

- 3,829

Outflow of cash and cash equivalents net of cash acquired

63,342

61,802

6,739

131,883

Consideration paid in cash and cash equivalents

67,136

61,802

6,774

135,712

Consideration to be transferred

37,922

5,595

-

43,517

Total consideration transferred or to be transferred

105,058

67,397

6,774

179,229

Fair value of previously held equity interest

53,629

-

-

53,629

Non-controlling interests at fair value

14,310

-

-

14,310

Minus: Identifiable net assets and liabilities at fair value

- 68,144

- 56,043

- 3,881

- 128,068

Goodwill

104,853

11,354

2,893

119,100

Goodwill related to the acquisiton of Visilab to the amount of €2,528 is deductible for tax purposes.

The acquisitions in 2017 contributed the following in revenue and net result for the Group:

in thousands of EUR

Visilab

Tesco
Opticians

Store and chain acquisitions

Total

Revenue

43,078

5,551

3,824

52,453

Net result

7,340

- 2,205

411

5,546

Had the acquisitions in 2017 been consolidated for the full year, revenue and net result would be:

in thousands of EUR

Visilab

Tesco
Opticians

Store and chain acquisitions

Total

Revenue

152,467

100,007

7,162

259,636

Net result

18,082

191

614

18,887

Aquisitions costs for the above acquisitions amount to €2,226 and are included in the general and administrative costs in the Income Statement.