Acquisition of subsidiaries

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Shares in the following subsidiaries were acquired during the year:

  Effective date
of acquisition
%
acquired
SUBSIDIARIES
Glocell Distribution Proprietary Limited 30 June 2018 48%
Distributor of airtime, starter packs and mobile phones through its retail outlets and to wholesale customers in South Africa, including postpaid and prepaid contracts
AV Technology Limited 1 August 2018 60%
Owner of system that offers Mobile Network Operators the ability to advance airtime, data and mobile money to subscribers in Africa
Lornanox Proprietary Limited 31 July 2018 100%
Owner of retail stores trading in cellular handsets, tablets and related accessories, as well as sim cards, postpaid and prepaid contracts

Details of the total net assets acquired and the resulting goodwill as at the date of acquisition are as follows:

Glocell 
Distribution 
Proprietary 
Limited 
R'000
 
   AV 
Technology 
Limited 
R'000
 
   WiConnect 
Proprietary 
Limited 
R'000
 
Total purchase consideration  173 398     84 187     5 000 
Fair value of net assets acquired  (45 381)    34 889     (40 588)
Goodwill  218 779     49 298     45 588 

The assets and liabilities acquired through acquisition are as follows:

   Glocell Distribution
Proprietary Limited 
   AV Technology
Limited 
   WiConnect Proprietary
Limited 
   Fair 
value at 
acquisition 
date 
R'000
 
   Acquirer's 
carrying 
amount on 
acquisition 
date 
R'000
 
   Fair 
value at 
acquisition 
date 
R'000
 
   Acquirer's 
carrying 
amount on 
acquisition 
date 
R'000
 
   Fair 
value at 
acquisition 
date 
R'000
 
   Acquirer's 
carrying 
amount on 
acquisition 
date 
R'000
 
Cash and cash equivalents  5 978     5 978     65 442     65 442     10 605     10 605 
Property, plant and equipment  5 733     5 733     –     –     39 251     39 251 
Intangible assets  52 364     29 571     78 059     440     –     – 
Goodwill  218 780     –     49 298     –     45 588     – 
Inventories  19 754     19 754     –     –     34 255     34 255 
Receivables  37 023     37 023     10 039     10 039     29 659     29 659 
Deferred tax  (6 300)    –     (21 733)    –     6 880     18 067 
Borrowings  –     –     –     –     (104 529)    (144 480)
Payables  (209 097)    (209 097)    (73 658)    (73 658)    (56 709)    (56 709)
Value of subsidiaries acquired  124 235     (111 038)    107 447     2 263     5 000     (69 352)
Non-controlling interest  57 740     (905)    – 
Value of net assets acquired  (53 298)    1 358     (69 352)
Total purchase consideration  173 398     84 187     5 000 
Debtors capitalised  (173 398)    –     – 
Cash and cash equivalents in subsidiary acquired  (5 978)    (65 442)    (10 605)
Cash outflow from acquisitions  (5 978)    18 745     (5 605)

Glocell Distribution Proprietary Limited (Glocell) and WiConnect Proprietary Limited (WiConnect) were purchased with the objective of affording the Group access to new channels for the supply and distribution of airtime, mobile devices and contracts. AV Technology Limited (AV Technology) gives the Group the ability to advance airtime, data and mobile money services to mobile network subscribers in Africa.

In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting terms to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the above acquisitions, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most significant among these in Glocell and WiConnect is the opportunity that the distribution network affords the Group. Most significant in AV Technology is the opportunity that the Prepaid Airtime Advance System affords the Group.