Notes to the accounts
16 Business combinations
On 24 July 2007, the group acquired 50% of the share capital of Earls Court & Olympia Group (‘EC&O’) which owns and manages the EC&O Centres in West London and the Brewery, Chiswell Streeet, London EC2. The group owns exhibition venues and provides conferencing and banqueting services to exhibition and conference organisers. This business contributed net revenues of £5.0 million, and a net loss of £3.0 million. Had the acquisition occurred on 1 January 2007 the net revenue would have been £27.2 million with net profit of £nil.
On 7 December 2007, the group acquired 100% of the share capital of the Covent Garden Restaurants Group (‘Restaurants’) which trades as licensed restaurants, bars and music venues. This business contributed net revenues and net profit of £nil, and had the acquisition occurred on 1 January 2007 the net revenue would have been £6.3 million with net profit of £0.4 million.
These amounts have been calculated by adjusting the results of the subsidiaries to reflect the group’s accounting policies.
| Purchase consideration: | Group m£ |
|||
|---|---|---|---|---|
| Cash paid | 90.9 | |||
| Direct costs relating to acquisition | 3.6 | |||
| Total purchase consideration | 94.5 | |||
| Fair value of assets acquired | (67.9) | |||
| Goodwill | 26.6 | |||
The goodwill is attributable to the value of the operating businesses, primarily the restaurants. The goodwill will be impaired over time in the course of realising the development potential in locations from which the businesses currently operate.
The assets and liabilities arising from the acquisition are as follows:
| Total | ||||||||
|---|---|---|---|---|---|---|---|---|
| Fair value £m |
Acquiree’s carrying value £m |
|||||||
| Non-current assets | ||||||||
| Investment and development property | 389.8 | 388.8 | ||||||
| Goodwill | – | 30.1 | ||||||
| Plant and equipment | – | 1.7 | ||||||
| Trade and other receivables | 1.8 | 1.2 | ||||||
| Investments | 0.1 | 0.1 | ||||||
| Current assets | ||||||||
| Trade and other receivables | 19.0 | 19.0 | ||||||
| Cash and cash equivalents | 4.2 | 4.2 | ||||||
| Current liabilities | ||||||||
| Trade and other payables | (29.4) | (28.0) | ||||||
| Tax liabilities | (0.7) | (0.7) | ||||||
| Borrowings, including finance leases | – | (10.1) | ||||||
| Group intercompany balances | (10.1) | 0.0 | ||||||
| Non-current liabilities | ||||||||
| Borrowings, including finance leases | (249.9) | (249.9) | ||||||
| Derivative financial instruments | 6.1 | 0.0 | ||||||
| Deferred tax provision | (11.5) | (5.9) | ||||||
| Other provisions | 0.0 | (0.2) | ||||||
| Net assets | 119.4 | 150.3 | ||||||
| Minority interests | (15.5) | |||||||
| Net assets acquired | 67.9 | |||||||
There were no business combinations in the year ended 31 December 2006.
From 25 March 2007 The MetroCentre Partnership has been consolidated as a subsidiary. £240 million of Capital was introduced into The MetroCentre Partnership by a third party comprising partner’s capital and loan. The net proceeds received were split between liability and minority interest components, with the carrying value liability component being the fair value of similar debt obtained from the market, as follows:
| £m | |
|---|---|
| Net proceeds of partnership capital from third party | 240 |
| Minority interests | (197) |
| Liability at the date of the balance sheet | 43 |
The effective interest rate on the liability component was 6.85 per cent.