Companies Consolidated

Changes in the scope of consolidation

The consolidated financial statements as of September 30, 2015, included 308 companies (December 31, 2014: 302 companies). As in the statements as of December 31, 2014, one of these companies was accounted for as a joint operation in line with Bayer’s interest in its assets, liabilities, revenues and expenses in accordance with IFRS 11 (Joint Arrangements). Two (December 31, 2014: three) joint ventures and four (December 31, 2014: three) associates were accounted for in the consolidated financial statements using the equity method according to IAS 28 (Investments in Associates and Joint Ventures).

Acquisitions, divestitures and discontinued operations

Acquisitions

On March 2, 2015, Covestro successfully completed the acquisition of all the shares of Thermoplast Composite GmbH, Germany, a technology leader specializing in the production of thermoplastic fiber composites. The aim of the acquisition is to expand the range of polycarbonate materials for major industries to include composites made from continuous fiber-reinforced thermoplastics. A purchase price of €18 million was agreed. This includes a variable component of €4 million. The purchase price pertained mainly to patents and goodwill.

On July 1, 2015, CropScience completed the acquisition of all the shares of SeedWorks India Pvt. Ltd., based in Hyderabad, India. The company is specialized in the breeding, production and marketing of hybrid seeds of tomato, hot pepper, okra and gourds. It has research and seed processing locations in Bangalore and Hyderabad respectively. The purchase of SeedWorks India is intended to further strengthen CropScience’s vegetable seed business in India. A basic purchase price of €78 million was agreed. The purchase price pertained mainly to patents, research and development projects and goodwill.

As part of the acquisition of the consumer care business of Merck & Co., Inc., Whitehouse Station, New Jersey, United States, the production facilities at the Pointe-Claire site in Canada were acquired on July 1, 2015. A purchase price of €70 million was agreed.

The global purchase price allocation for the consumer care business of Merck & Co., Inc., was completed in September 2015. The purchase price was reduced by €8 million in 2015. This reduction pertained mainly to other intangible assets, inventories and goodwill. Further explanations concerning the purchase price allocation are given under “Accounting changes.”

The court proceedings initiated by former minority stockholders of Bayer Pharma AG (formerly known as Bayer Schering Pharma AG), Berlin, Germany, were settled in August 2015. The corresponding supplementary payment represents a subsequent purchase price adjustment according to the March 31, 2004 version of IFRS 3 applicable at the acquisition date. The goodwill of €261 million recognized in 2013 is thereby reduced by €115 million.

The effects of these transactions and other, smaller transactions made in the first nine months of 2015 – along with adjustments to purchase prices and purchase price allocations made in the first nine months of 2015 relating to previous years’ / quarters’ transactions – on the Group’s assets and liabilities as of the respective acquisition or adjustment dates are shown in the table. Net of acquired cash and cash equivalents, the transactions resulted in the following cash outflow:

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

 

 

 

 

 

First Nine Months 2015

 

 

€ million

Goodwill

 

26

Patents and technologies

 

40

Other intangible assets

 

46

Property, plant and equipment

 

24

Inventories

 

(68)

Other current assets

 

48

Cash and cash equivalents

 

2

Deferred tax assets

 

(2)

Other provisions

 

(62)

Financial liabilities

 

Other liabilities

 

3

Deferred tax liabilities

 

(21)

Net assets

 

36

Changes in non-controlling interest

 

Purchase price

 

36

Acquired cash and cash equivalents

 

(2)

Liabilities for future payments

 

111

Purchase price adjustment

 

(37)

Payments for previous years’ / quarters’ acquisitions

 

51

Net cash outflow for acquisitions

 

159

Divestitures

On March 2, 2015, Consumer Health completed the sale of two equine products, Legend / Hyonate and Marquis, to Merial, Inc., Duluth, Georgia, United States. A purchase price of €120 million was agreed. The one-time payment is accounted for as deferred income. The purchase prices for Legend / Hyonate and Marquis will be reflected in sales and earnings over a four-year and a three-year period, respectively.

Discontinued operations

On June 8, 2015, an agreement was signed to sell the Diabetes Care business to Panasonic Healthcare Holdings Co., Ltd., Tokyo, Japan, for €1,022 million. The sale will include 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. Closing of the transaction is subject to customary conditions, including relevant antitrust clearance, and is expected to occur in the first quarter of 2016.

The Diabetes Care activities are reported as a discontinued operation. The respective information is provided from the standpoint of the Bayer Group and is not intended to present these activities as a separate entity.

The income statements for the discontinued operation are given below:

Income Statements for Discontinued Operations

 

 

 

 

 

 

 

 

 

3rd Quarter 2014

3rd Quarter 2015

 

First Nine Months 2014

First Nine Months 2015

 

 

€ million

€ million

 

€ million

€ million

1

EBIT = earnings before financial result and taxes

Net sales

 

220

232

 

653

705

Cost of goods sold

 

(84)

(98)

 

(254)

(284)

Gross profit

 

136

134

 

399

421

 

 

 

 

 

 

 

Selling expenses

 

(83)

(91)

 

(246)

(270)

Research and development expenses

 

(9)

(12)

 

(26)

(34)

General administration expenses

 

(8)

(9)

 

(26)

(27)

Other operating income / expenses

 

(6)

(6)

 

(2)

EBIT1

 

30

16

 

99

90

 

 

 

 

 

 

 

Financial result

 

 

 

 

 

 

 

 

 

Income before income taxes

 

30

16

 

99

90

 

 

 

 

 

 

 

Income taxes

 

(5)

 

(11)

(12)

 

 

 

 

 

 

 

Income after income taxes

 

25

16

 

88

78

The assets and liabilities of the discontinued operation are shown in the following table:

Assets and Liabilities of Discontinued Operations

 

 

 

 

 

Sep. 30, 2015

 

 

€ million

Noncurrent assets

 

 

Goodwill

 

35

Other intangible assets

 

6

Property, plant and equipment

 

7

Other financial assets

 

Other receivables

 

Deferred taxes

 

 

 

48

Current assets

 

 

Inventories

 

116

Trade accounts receivable

 

Other financial assets

 

Other receivables

 

Claims for income tax refunds

 

Cash and cash equivalents

 

 

 

116

 

 

 

Total assets

 

164

 

 

 

Noncurrent liabilities

 

 

Provisions for pensions and other post-employment benefits

 

24

Other provisions

 

Financial liabilities

 

Other liabilities

 

Deferred taxes

 

 

 

24

Current liabilities

 

 

Other provisions

 

85

Financial liabilities

 

Trade accounts payable

 

Income tax liabilities

 

Other liabilities

 

2

 

 

87

 

 

 

Total liabilities

 

111

In addition to the assets of the discontinued Diabetes Care business amounting to €164 million, the statement of financial position as of September 30, 2015, reflects a further €14 million in assets held for sale.

The discontinued operation affected the Bayer Group statements of cash flows as follows:

Cash Flows of Discontinued Operations

 

 

 

 

 

 

 

 

 

3rd Quarter 2014

3rd Quarter 2015

 

First Nine Months 2014

First Nine Months 2015

 

 

€ million

€ million

 

€ million

€ million

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

 

35

24

 

86

80

Net cash provided by (used in) investing activities

 

(2)

(1)

 

(5)

(2)

Net cash provided by (used in) financing activities

 

(33)

(23)

 

(81)

(78)

Change in cash and cash equivalents