On 28 August 2019, Dechra acquired 100% of the share capital of Ampharmco LLC and its associated companies Dragon Fire Holdings LLC and Black Griffin Holdings LLC (collectively Ampharmco), together with its manufacturing site based in Fort Worth, Texas. The Group paid £24.3 million (USD29.6 million) consideration in cash.
| Fair value £m |
|
| Recognised amounts of identifiable assets acquired | |
| Property, plant and equipment | 3.4 |
| Inventory | 1.2 |
| Trade and other receivables | 0.4 |
| Trade and other payables | (0.3) |
| Cash | – |
| Lease liabilities | (0.1) |
| Provisions | (0.4) |
| Intangible assets | 15.0 |
| Current tax liabilities | (1.5) |
| Net identifiable assets | 17.7 |
| Goodwill | 6.6 |
| Total consideration | 24.3 |
| Satisfied by: | |
| Cash | 24.3 |
| Total consideration transferred and net cash outflow arising on acquisition | 24.3 |
The fair value adjustments made principally relate to harmonisation with Group IFRS accounting policies, including the application of fair values on acquisition, principally the recognition of intangible assets in accordance with IFRS 3. The impact of increasing the discount rates used to calculate the acquired intangibles by 1.0% is to reduce the value of the acquired intangible by £1.0 million, with a corresponding increase in goodwill.
The goodwill of £6.6 million arising from the acquisition predominantly relates to the future benefits of an FDA registered facility to manufacture solid doses, liquids, creams and ointments, which will significantly strengthen the manufacturing capability for the North American market. No deferred tax arises on acquisition because the tax elections available in the US enable a tax base to be recognised for certain assets identified at that point in time.
Acquisition related costs (included in non-underlying operating expenses) amounted to £1.2 million. Ampharmco's results are reported within the NA Pharmaceuticals Segment.
Ampharmco contributed £2.6 million revenue and £0.6 million loss to the Group's underlying operating profit for the period between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first date of the financial year, the contribution to Group revenues for the period would have been £3.4 million and the contribution to the Group's underlying operating profit would have been £0.7 million loss. The reported operating loss after taking into account non-underlying items for the amortisation of intangible assets would have been £1.7 million.
On 16 March 2020, Dechra acquired the worldwide rights to the Mirataz product portfolio from Kindred Biosciences Incorporated for cash consideration of £34.9 million (USD43.0 million) and a royalty on future sales. The acquisition completed on 16 April 2020. The Net Present Value of the future sales royalties has been valued at £10.9 million, and is included within the contingent consideration liability at year end (refer to note 32). The Group has early adopted the amendments to IFRS3 'Business Combinations' and applied the optional concentration test for this transaction. Accordingly, it has been concluded that substantially all the value arising from the transaction relates to the product rights which are recognised as an intangible asset. The total intangible asset recognised in relation to this acquisition is £45.8 million (refer to note 12). A payment of £0.6 million was also made for inventory.
Following the acquisition of Dechra Brazil in December 2018, the fair value of the assets and liabilities acquired have been reconsidered since the Annual Report as at 30 June 2019 as part of the measurement period. In relation to the 30 June 2019 balance sheet, hindsight adjustments have been made as detailed in the table below;
| Reported June 2019 £m |
Opening Balance sheet adjustments £m | Restated June 2019 £m |
|
| Intangible assets | 687.0 | (6.4) | 680.6 |
| Inventory | 104.0 | (0.5) | 103.5 |
| Trade and other receivables | 99.9 | (0.1) | 99.8 |
| Deferred tax due after more than one year | (81.5) | 7.0 | (74.5) |
A hindsight adjustment has been made within tangible fixed assets to reclassify £0.1 million from Plant & Fixtures to Freehold Land & Buildings.
During the measurement period the deferred tax position in respect of the acquisition has been concluded, taking into account elections available and contemplated at the acquisition date which enable a tax base to be established in Brazil for certain assets identified on acquisition. While enacted during the measurement period, this is based on information and facts that existed at the acquisition date. The disclosure of the final fair values of the assets and liabilities acquired have been included in the financial statements for the year ended 30 June 2020.
Following the acquisition of the trade and assets of Caledonian Holdings Ltd in October 2018, the disclosure of final fair values of the assets and liabilities acquired has been included in the financial statements for the year ended 30 June 2019.