Notes 21-25
- 21 Reserves
- 22 Minority interests
- 23 Dividends to shareholders
- 24 Acquisitions of business operations
- 25 Post-retirement benefits
24 ACQUISITIONS OF BUSINESS OPERATIONS
Details with regard to acquisitions made during the year ended 31 December 2007 are set out below:
MedImmune, Inc.
On 1 June 2007, AstraZeneca announced the successful tender offer for all the outstanding shares of common stock of MedImmune, Inc., a world-leading biotechnology company with proven biologics discovery and development strength, pipeline and leading biomanufacturing capability. At that date, approximately 96.0% of the outstanding shares were successfully tendered; the remaining shares were acquired by 18 June 2007. The financial results of MedImmune, Inc. have been consolidated into the Group’s results from 1 June 2007.
Cash consideration of $13.9bn was paid for the outstanding shares. After taking account of the cash and investments acquired, together with the settlement of MedImmune’s convertible debt and outstanding share options, the total cash paid to acquire MedImmune was $15.6bn.
In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting terms to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the acquisition of MedImmune, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most significant amongst these is the premium attributable to a pre-existing, well positioned business in the innovation intensive, high growth biologics market with a highly skilled workforce and established reputation. Other important elements include buyer specific synergies, potential additional indications for identified products and the core technological capabilities and knowledge base of the company.
MedImmune, Inc. contributed $714m of turnover in the period since acquisition. After amortisation, net investments/interest costs (including interest costs of external financing of $446m) and tax, the loss attributable to MedImmune since acquisition is $410m. If the acquisition had taken effect at the beginning of the reporting period (1 January 2007), on a proforma basis the revenue, profit before tax and profit after tax of the combined Group for the year would have been $30,127m, $7,576m and $5,351m, respectively. Basic and diluted Earnings per Share for the combined Group would have been $3.56 and $3.55, respectively. This proforma information has been prepared taking into account amortisation, interest costs and related tax effects but does not purport to represent the results of the combined Group that actually would have occurred had the acquisition taken place on 1 January 2007 and should not be taken to be representative of future results.
| Book value $m |
Fair value adjustment $m |
Fair value $m |
|
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 193 | 7,882 | 8,075 |
| Property, plant and equipment | 523 | 70 | 593 |
| Other | 550 | (17) | 533 |
| 1,266 | 7,935 | 9,201 | |
| Current assets | 1,439 | 115 | 1,554 |
| Current liabilities | (326) | 39 | (287) |
| Additional obligations related to convertible debt and share options | – | (1,724) | (1,724) |
| Non-current liabilities | |||
| Interest bearing loans and borrowings | (1,165) | – | (1,165) |
| Other payables | (73) | – | (73) |
| Deferred tax assets/(liabilities) | 314 | (2,694) | (2,380) |
| (924) | (2,694) | (3,618) | |
| Total assets acquired | 1,455 | 3,671 | 5,126 |
| Goodwill | 8,757 | ||
| Total consideration for outstanding shares | 13,883 | ||
| Additional payments related to convertible debt, share options and other acquisition obligations | 1,770 | ||
| Total consideration | 15,653 | ||
The total consideration for outstanding shares includes $29m of directly attributable costs.
Other acquisitions
| Book value $m |
Fair value adjustment $m |
Fair value $m |
|
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | – | 347 | 347 |
| Property, plant and equipment | 7 | – | 7 |
| 7 | 347 | 354 | |
| Current assets | 12 | – | 12 |
| Current liabilities | (19) | – | (19) |
| Non-current liabilities | |||
| Other payables | (9) | – | (9) |
| Deferred tax liabilities | – | (118) | (118) |
| (9) | (118) | (127) | |
| Total assets acquired | (9) | 229 | 220 |
| Goodwill | – | ||
| Total consideration | 220 | ||
The total consideration includes $3m of directly attributable costs.
Arrow Therapeutics Limited
On 28 February 2007, the Company acquired 100% of the issued share capital of Arrow Therapeutics Limited for cash consideration of $147m. Arrow Therapeutics Limited is a UK biotechnology company, focused on the discovery and development of anti-viral therapies. The acquisition provides a widely recognised expert group and technology platform in an area of research that complements internal capabilities in the therapy area of infection and anti-bacterials.
Arrow Therapeutics Limited had a turnover of $nil and a loss of $26m for the year, of which $nil of turnover and $17m of loss related to the period since acquisition.
Atlantis Components Inc.
On 10 October 2007, a Company subsidiary, Astra Tech, acquired 100% of the issued share capital of Atlantis Components Inc. for cash consideration of $71m.
Atlantis Components Inc, is a US dental business whose principal activity is the design and manufacture of bespoke dental implant abutments. The intangible asset acquired is the specialist CAD/CAM technology used to design and manufacture customised dental implant abutments. The acquisition further strengthens Astra Tech’s product portfolio in the field of dental implants.
The turnover and loss for both the period since acquisition and full year are immaterial.
Cash flows
| MedImmune, Inc. $m |
Other $m |
Total $m |
|
|---|---|---|---|
| Total consideration | 15,653 | 220 | 15,873 |
| Cash and cash equivalents included in undertaking acquired | (979) | (3) | (982) |
| Net cash consideration | 14,674 | 217 | 14,891 |
Details with regard to acquisitions made during the year ended 31 December 2006 are set out below:
Cambridge Antibody Technology Group plc
On 22 August 2006, AstraZeneca completed the acquisition of 100% of the issued share capital of Cambridge Antibody Technology Group plc, a biopharmaceutical company with a leading position in the discovery and development of human therapeutic antibodies. On 22 June 2006, the offer to acquire the entire share capital of Cambridge Antibody Technology Group plc was declared unconditional and the financial results of Cambridge Antibody Technology Group plc were consolidated into the Company’s results from this date. Cash consideration of $1,074m was paid during the year. Prior to the acquisition, AstraZeneca had been engaged in a collaboration and licensing agreement with Cambridge Antibody Technology Group plc. At 31 December 2005, AstraZeneca held a 19.2% interest in the issued share capital of Cambridge Antibody Technology Group plc, which was recorded on the balance sheet within non-current asset investments as ‘Equity securities available for sale’.
The goodwill arising on the acquisition results from assets which cannot be recognised separately and measured reliably including early stage pipeline products and a highly skilled workforce.
Cambridge Antibody Technology Group plc had a turnover of $nil and a loss of $58m for the year, of which $nil of turnover and $38m of loss related to the period since acquisition. Subsequent to the acquisition of Cambridge Antibody Technology Group plc, the Humira™royalty stream acquired with the company was sold for $661m (see Note 4).
| Book value $m |
Fair value adjustment $m |
Fair value $m |
|
|---|---|---|---|
| Non-current assets | |||
| Intangible assets – Humira™royalty stream | – | 675 | 675 |
| Intangible assets – other | 21 | 560 | 581 |
| Property, plant and equipment | 24 | – | 24 |
| Other | 20 | – | 20 |
| 65 | 1,235 | 1,300 | |
| Current assets | 336 | – | 336 |
| Current liabilities | (72) | – | (72) |
| Non-current liabilities | |||
| Deferred taxation | (5) | (364) | (369) |
| Other | – | (20) | (20) |
| (5) | (384) | (389) | |
| Total assets acquired | 324 | 851 | 1,175 |
| Goodwill | – | 104 | 104 |
| Less: | |||
| Existing non-current asset investment | – | (163) | (163) |
| Total consideration | 324 | 792 | 1,116 |
| Exchange | – | (24) | (24) |
| Settled in loan notes | – | (18) | (18) |
| Cash paid | 324 | 750 | 1,074 |
The total consideration includes $15m of directly attributable costs.
KuDOS Pharmaceuticals Limited
On 31 January 2006, the Company acquired 100% of the issued share capital of KuDOS Pharmaceuticals Limited for a cash consideration of $206m. KuDOS Pharmaceuticals Limited is a UK biotechnology company focused on the discovery and development of oncology therapies based on inhibition of DNA repair. The acquisition provides the Company with a widely recognised expert group and technology platform that complements the existing capabilities of the oncology franchise, one of the Company’s key therapy areas. The goodwill arising on the acquisition results from assets which cannot be recognised separately and measured reliably and includes early stage pipeline products.
KuDOS Pharmaceuticals Limited had a turnover of $nil and a loss of $15m for the year, of which $nil of turnover and $14m of loss related to the period since acquisition.
| Book value $m |
Fair value adjustment $m |
Fair value $m |
|
|---|---|---|---|
| Non-current assets | |||
| Intangible assets – other | – | 285 | 285 |
| Property, plant and equipment | 2 | – | 2 |
| 2 | 285 | 287 | |
| Current assets | 3 | – | 3 |
| Current liabilities | (11) | – | (11) |
| Non-current liabilities | |||
| Deferred taxation | – | (85) | (85) |
| Total assets acquired | (6) | 200 | 194 |
| Goodwill | – | 12 | 12 |
| Total consideration | (6) | 212 | 206 |
The total consideration includes $2m of directly attributable costs.
Cash flows
| Cambridge Antibody Technology Group plc $m |
KuDOS Pharmaceuticals Limited $m |
Total $m |
|
|---|---|---|---|
| Total consideration | 1,074 | 206 | 1,280 |
| Cash and cash equivalents included in undertaking acquired | (129) | (3) | (132) |
| Net cash consideration | 945 | 203 | 1,148 |
