32. Business Combinations
On September 8, 2014 the Lindt & Sprüngli Group acquired Russell Stover Candies, LLC, a traditional US family business and the leading manufacturer of pralines and seasonal candies in the US, headquartered in Kansas City, Missouri. This biggest and most important strategic acquisition in the company's history will give Lindt & Sprüngli an established presence throughout the USA with its LINDT, GHIRARDELLI, RUSSELL STOVER, WHITMAN'S and PANGBURN'S brands. The addition of the Russell Stover and Whitman's brands perfectly complements Lindt & Sprüngli's existing chocolate portfolio and will make the company the Number 3 North American chocolate manufacturer. Since the acquisition date, Russell Stover Candies, LLC is fully consolidated in the financial statements of the Group.
In the course of the asset deal and based on the provisional purchase price allocation the Lindt & Sprüngli Group identified net assets of CHF 783.5 million for the cash settled consideration of CHF 1,499.6 million (CHF 1,148.6 million including the present value of future tax savings):
| CHF million | 2014 |
|---|---|
| Property, plant, and equipment | 93.2 |
| Brands and intellectual property rights | 459.9 |
| Customer relationships | 121.5 |
| Inventories | 155.3 |
| Accounts receivables | 22.7 |
| Cash and cash equivalents | 24.9 |
| Other current assets | 21.5 |
| Pension liabilities | – 21.7 |
| Provisions | – 8.5 |
| Accounts payable | – 44.9 |
| Accrued liabilities | – 40.5 |
| Fair Value of acquired net assets | 783.5 |
| Goodwill | 716.1 |
| Total | 1,499.6 |
The fair values of the identifiable intangible assets consist of "brands and intellectual property rights" and "customer relationships". The goodwill resulting from the acquisition amounts to CHF 716.1 million and mainly represents a control premium and the synergies that can be expected from integrating the acquired company into the Lindt & Sprüngli Group's existing business.
"Goodwill", "brands and intellectual property rights" and "customer relationships" were recognized in the tax accounts and can be depreciated over their taxable useful life on a straight line basis. The present value of these tax deductible depreciation is estimated at CHF 351.0 million and represents future tax savings. Directly attributable transaction costs of CHF 7.2 million are reported as part of the "operating expenses".
As communicated in the course of the acquisition, annual sales of Russell Stover Candies, LLC amount to USD 500 million. During the four months since acquisition until December 31, 2014 the Company accounted for sales of CHF 252.1 million and contributed to the consolidated operating result on a group-wide common basis, considering seasonal fluctuations and the purchase price allocation conducted in inventories.