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Following the Acquisition on 2 October 2017, the Group now holds a 95,47% stake in Ceramic and an effective 71,54% in Ezee Tile. Accordingly, the results for the review period include the consolidated results of both businesses from 2 October 2017.
On 2 October 2017, the Group acquired an additional 74,5% interest in the voting shares of Ceramic for a consideration of
R3,5 billion, increasing its ownership interest to 95,47%. Ceramic is a manufacturer of glazed porcelain floor tiles; ceramic wall
and floor tiles; vitreous china sanitaryware and acrylic baths and shower trays. The Group acquired the additional interest in
Ceramic because the Acquisition will result in improved efficiencies and reduced costs; enhance the allocation of capital as
well as create a depth of management, experience and skill within the Group.
The Group has elected to measure non-controlling interests in Ceramic at proportionate share of the book value.
Assets acquired and liabilities assumed
The book values of the identifiable assets and liabilities of Ceramic as at 2 October 2017 are:
| |
R million |
|
| ASSETS |
|
|
| Property, plant and equipment |
1 431 |
|
| Goodwill |
5 |
|
| Equity-accounted investee |
57 |
|
| Deferred taxation assets |
2 |
|
| Inventories |
238 |
|
| Trade and other receivables |
549 |
|
| Income tax receivable |
— |
|
| Cash and cash equivalents |
141 |
|
| |
2 423 |
|
| LIABILITIES |
|
|
| Shareholders’ loans |
4 |
|
| Deferred taxation liabilities |
83 |
|
| Trade and other payables and provisions |
352 |
|
| Income tax payable |
14 |
|
| Shareholders for dividends |
# |
|
| |
453 |
|
| Total identifiable net assets at fair value |
1 970 |
|
# Less than R1 million.
The Group has also obtained a controlling interest in Ezee Tile as a result of the Acquisition. Prior to the Acquisition, Italtile
Ceramics and Ceramic each held a 36,6% interest in Ezee Tile. Post the Acquisition, the Group now holds an effective
interest of 71,54% in Ezee Tile.
The book values of the identifiable assets and liabilities of Ezee Tile as at 2 October 2017 are:
| |
R million |
|
| ASSETS |
|
|
| Property, plant and equipment |
42 |
|
| Investments in subsidiaries |
5 |
|
| Inventories |
43 |
|
| Loans to group companies |
7 |
|
| Trade and other receivables |
78 |
|
| Cash and cash equivalents |
27 |
|
| |
202 |
|
| LIABILITIES |
|
|
| Deferred taxation liabilities |
# |
|
| Trade and other payables and provisions |
57 |
|
| Loans from group companies |
6 |
|
| Income tax payable |
5 |
|
| |
68 |
|
| Total identifiable net assets at fair value |
134 |
|
| Purchase consideration |
|
|
| Share consideration |
1 746 |
|
| Cash consideration |
1 746 |
|
| Total |
3 492 |
|
| Analysis of cash flows on acquisition |
|
|
| Transaction costs of the Acquisition |
(24) |
|
| Net cash acquired with subsidiary |
168 |
|
| Cash consideration (per above) |
(1 746) |
|
| Net cash flow on Acquisition |
(1 602) |
|
# Less than R1 million.
Accounting treatment
The Group adopted a pooling of interest accounting policy to account for the Acquisition which is a common control
transaction and thus scoped out of IFRS 3 Business Combinations (“IFRS 3”). Under the pooling of interest method, the carrying
amounts of the assets and liabilities of Ceramic and Ezee Tile have been included in the statement of financial position of
Italtile, with the difference between the purchase consideration and the net assets of Ceramic and Ezee Tile being included
directly in equity and netted off against retained income. This amounted to R2,6 billion.
No goodwill was recognised.
Transaction costs amounting to R25 million related to the Acquisition were incurred and capitalised to the cost of investment
in Ceramic. |