Acquisitions, Divestitures and Discontinued Operations

Acquisitions

On January 3, 2017, Bayer acquired the Cydectin™ portfolio in the United States from Boehringer Ingelheim Vetmedica Inc., St. Joseph, United States. The acquisition comprises the CYDECTIN Pour-On, CYDECTIN Injectable and CYDECTIN Oral Drench endectocides for cattle and sheep. The acquisition is intended to strengthen the antiparasitics portfolio in the United States, and will see endectocides added to the portfolio. A purchase price of €158 million was agreed, which is subject to the usual price adjustment mechanisms. The purchase price was provisionally allocated mainly to trademarks and goodwill. The purchase price allocation currently remains incomplete pending compilation and review of the relevant financial information. It is therefore possible that changes will be made in the allocation of the purchase prices to the individual assets.

The effects of this transaction – as of the acquisition date – on the Group’s assets and liabilities in the first half of 2017 are shown in the following table. The transaction resulted in the following cash outflow:

Acquired Assets, Assumed Liabilities and Adjustments (Fair Values at the Respective Acquisition Dates)

 

 

H1 2017

 

 

€ million

Goodwill

 

51

Trademarks

 

85

Production rights

 

4

Inventories

 

18

Net assets

 

158

Changes in noncontrolling interest

 

Purchase price

 

158

Net cash outflow for acquisitions

 

158

Planned acquisitions

Details of the planned acquisition of Monsanto are given in our Annual Report 2016.

Divestments

On April 3, 2017, Covestro completed the sale of a North American spray polyurethane foam system house to Accella Polyurethane Systems LLC, Maryland Heights, United States. A purchase price of €47 million was agreed. Income of €39 million was reported in special items.

On April 1, 2017, Consumer Health completed the sale of a production facility in Pointe-Claire, Canada, to Famar Montréal Inc., Montréal, Canada. The base sale price was CAD1 million.

The effects of these divestments made in the first half of 2017 were as follows:

Divested Assets and Liabilities

 

 

H1 2017

 

 

€ million

Goodwill

 

2

Property, plant and equipment

 

3

Inventories

 

12

Other liabilities

 

(3)

Divested net assets

 

14

The divested assets were reported in previous quarters as assets held for sale.

Discontinued operations

The sale of the Diabetes Care business to Panasonic Healthcare Holdings Co., Ltd., Tokyo, Japan, for around €1 billion was completed on January 4, 2016. The sale includes the leading Contour™ portfolio of blood glucose monitoring meters and strips, as well as other products such as Breeze™2, Elite™ and Microlet™ lancing devices.

The sale of the Diabetes Care business also comprises further significant obligations by Bayer that will be fulfilled over a period of up to two years subsequent to the date of divestment. The sale proceeds will be recognized accordingly over this period and reported as income from discontinued operations. Deferred income has been recognized in the statement of financial position and will be dissolved as the obligations are fulfilled. An amount of €287 million was recognized in sales in the first half of 2017.

The obligations to be fulfilled over a period of up to two years after the divestment of the Diabetes Care business are also reported as discontinued operations in the income statement and the statement of cash flows. They resulted in sales of €25 million in the first half of 2017.

The items in the statement of financial position pertaining to the Diabetes Care business are shown in the segment reporting under “All Other Segments.” In addition to the aforementioned deferred income (€177 million), the statement of financial position includes other receivables (net: €60 million), deferred tax assets (net: €29 million), income tax liabilities (€56 million) and other provisions (€4 million).

The sale of the Consumer business (CS Consumer) of Bayer’s Environmental Science unit to SBM Développement SAS, Lyon, France, was completed on October 4, 2016. These activities have been reported as discontinued operations since the second quarter of 2016.

The income statements of the discontinued operations for the second quarter of 2017 are given below:

Income Statements for Discontinued Operations

 

 

Diabetes Care

 

CS Consumer

 

Total

 

 

Q2 2016

Q2 2017

 

Q2 2016

Q2 2017

 

Q2 2016

Q2 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

EBIT = income after income taxes, plus income taxes, plus financial result

Net sales

 

146

184

 

79

 

225

184

Cost of goods sold

 

(25)

(7)

 

(40)

 

(65)

(7)

Gross profit

 

121

177

 

39

 

160

177

Selling expenses

 

(5)

(1)

 

(31)

 

(36)

(1)

Research and development expenses

 

 

(3)

 

(3)

General administration expenses

 

(3)

(3)

 

(2)

 

(5)

(3)

Other operating income / expenses

 

(7)

 

(54)

 

(61)

EBIT1

 

106

173

 

(51)

 

55

173

Financial result

 

 

 

Income before income taxes

 

106

173

 

(51)

 

55

173

Income taxes

 

(16)

(25)

 

16

 

(25)

Income after income taxes

 

90

148

 

(35)

 

55

148

The income statements of the discontinued operations for the first half of 2017 are given below:

Income Statements for Discontinued Operations

 

 

Diabetes Care

 

CS Consumer

 

Total

 

 

H1 2016

H1 2017

 

H1 2016

H1 2017

 

H1 2016

H1 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

EBIT = income after income taxes, plus income taxes, plus financial result

Net sales

 

295

312

 

166

 

461

312

Cost of goods sold

 

(121)

(14)

 

(82)

 

(203)

(14)

Gross profit

 

174

298

 

84

 

258

298

Selling expenses

 

(8)

(2)

 

(57)

 

(65)

(2)

Research and development expenses

 

(2)

 

(4)

 

(6)

General administration expenses

 

(10)

(5)

 

(4)

 

(14)

(5)

Other operating income / expenses

 

(5)

5

 

(55)

 

(60)

5

EBIT1

 

149

296

 

(36)

 

113

296

Financial result

 

 

 

Income before income taxes

 

149

296

 

(36)

 

113

296

Income taxes

 

(20)

(49)

 

12

 

(8)

(49)

Income after income taxes

 

129

247

 

(24)

 

105

247

In the second quarter of 2017, the discontinued operations affected the Bayer Group statement of cash flows as follows:

Statements of Cash Flows for Discontinued Operations

 

 

Diabetes Care

 

CS Consumer

 

Total

 

 

Q2 2016

Q2 2017

 

Q2 2016

Q2 2017

 

Q2 2016

Q2 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

Net cash provided by (used in) operating activities (net cash flow)

 

(41)

(3)

 

31

 

(10)

(3)

Net cash provided by (used in) investing activities

 

 

 

Net cash provided by (used in) financing activities

 

41

3

 

(31)

 

10

3

Change in cash and cash equivalents

 

 

 

In the first half of 2017, the discontinued operations affected the Bayer Group statement of cash flows as follows:

Statements of Cash Flows for Discontinued Operations

 

 

Diabetes Care

 

CS Consumer

 

Total

 

 

H1 2016

H1 2017

 

H1 2016

H1 2017

 

H1 2016

H1 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

Net cash provided by (used in) operating activities (net cash flow)

 

778

12

 

(18)

 

760

12

Net cash provided by (used in) investing activities

 

 

 

Net cash provided by (used in) financing activities

 

(778)

(12)

 

18

 

(760)

(12)

Change in cash and cash equivalents

 

 

 

As no cash is assigned to discontinued operations, the balance of the cash provided is deducted again in financing activities.