Arla Foods Annual Report 2020
Management Review Our Strategy
Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Capital employed
3.5 PURCHASE AND SALE OF BUSINESS OR ACTIVITIES
Acquisitions and divestments
Arla had no acquisition or divestment activities of any
significance in 2020.
Prior year acquisitions
In May 2019 Arla acquired the operations of the cheese
business in MENA from Mondelez International
including production facilities in Bahrain and related
working capital items. The acquisition was in line with
the strategy to expand branded cheese production in
the MENA region and to improve overall efficiency in
the group's supply chain.
The fair value of the net assets acquired was EUR 66
million and consisted of production facilities and
inventories. Goodwill totalled EUR 80 million and
Table 3.5.a Mergers and acquisitions
(EURM)
Property, plant and equipment
Inventory
Total net assets acquired
Goodwill
Purchase price, net
Deferred payment
Cash payment during the year
presents the benefit of access to production facilities in
Bahrain, a location well-positioned to support our
strategic ambition in MENA and the possibility to further
optimise Arla's supply chain structure.
In 2019 the revenue contribution from the Mondeléz
acquisition was EUR 51 million.
Prior year divestments
In March 2019 Arla divested both its minority interests
in NGF Nature Energy Videbæk A/S, Denmark and
Martin Sengele Produits Laitiers SAS, France (the Allgäu
business), for total proceeds of EUR 16 million.
2020
2019
0
48
0
18
0
66
0
80
0
146
0
22
0
168
Accounting policies
Recognition date and considerations
Newly acquired companies are recognised in the
consolidated financial statements at the date when the
group obtains control. The purchase consideration is
generally measured at fair value. If an agreement
relating to a business combination requires that the
purchase consideration be adjusted in connection with
future events or the performance of certain obligations
(contingent consideration), this portion of the purchase
considerations is recognised at fair value at the date of
acquisition. Changes in estimates relating to a
contingent consideration are recognised in the income
statement. Costs directly attributable to the acquisition
are recognised in the income statement as incurred.
The acquired assets, liabilities and contingent liabilities
are generally measured at their fair value at the date of
acquisition.
In a business combination achieved in stages (step
acquisition), the shareholding held immediately before
the step acquisition where control is gained is
remeasured at fair value at the acquisition date. Any
gains or losses arising from such remeasurement are
recognised in the income statement. The total fair value
of the shareholding held immediately after the step
acquisition is estimated and recognised as the cost of
the total shareholding in the company.
Goodwill arises when the aggregate of the fair value of
consideration transferred, previously held interest and
the value assigned to non-controlling interest holders
exceeds the fair value of the identifiable net assets of
the acquired company. Any identified goodwill is not
subject to amortization, but is tested annually for
impairment. The methodology outlined above also
applies to mergers with other cooperatives, where the
owners of the acquired company become owners of
Arla Foods amba. The purchase consideration is
calculated at the acquisition date when fair values of
the assets are transferred and equity instruments are
issued. Positive differences between the consideration
and fair value are recognised as goodwill.
Divestment
Changes in the group's interest in a subsidiary that do
not result in a loss of control are recognised as equity
transactions.
Enterprises divested are recognised in the consolidated
income statement up to the date of disposal. Compara-
tive figures are not restated to reflect disposals. Gains or
losses on divestment of subsidiaries and associates are
determined as the difference between the selling price
and the carrying amount of the net assets, including
goodwill, at the date of divestment and costs necessary
to make the sale.
♫ Uncertainties and estimates
To determine the classification of investments, a
discretionary assessment of the level of influence is
required.
Acquisitions where the group gains control of an entity
requires estimates and judgements to be applied, as
uncertainties regarding identification and fair value
measurement of assets, liabilities and contingent
liabilities exist.
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