Acquisition of subsidiary

Shares in the following subsidiary were acquired during the period:		Effective date of acquisition		% acquired
Subsidiary
Viamedia Proprietary Limited		1 September 2014		75
Details of the provisional total net assets acquired and the resulting goodwill as at the date of acquisition are as follows:				Total R’000
Total purchase consideration				253 374
Fair value of net assets acquired				60 204
Goodwill				193 170
The assets and liabilities acquired through acquisition are as follows:		Fair value at acquisition date R’000		Acquirer’s carrying amount on acquisition date R’000
Cash and cash equivalents		(21 420)		(21 420)
Property, plant and equipment		1 577		1 577
Intangible assets*		134 814		17
Goodwill		193 170		—
Loans receivable		13 026		13 026
Inventories		619		619
Receivables		29 970		29 970
Deferred tax*		(37 604)		139
Borrowings		(11 014)		(11 014)
Current tax liability		(10 274)		(10 274)
Payables		(12 080)		(12 080)
		280 784		(9 440)
Total purchase consideration				253 374
Contingent consideration				(131 027)
Cash and cash equivalents in subsidiary acquired				21 420
Cash outflow on acquisition				143 767

*

Included in intangibles is R9.5 million of customer relationships and R125 million of customer listing which relate to the provisional purchase price allocations performed for Viamedia in terms of IFRS 3(R): Business Combinations. Deferred tax to the value of R37.7 million was raised on recognition of these intangible assets.

Viamedia was purchased with the objective of affording the Group access to new channels for the distribution of both Viamedia and Group products and services.

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 acquisition of Viamedia, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most significant among these is the opportunity that the distribution network affords the Group.

The contingent consideration arrangement requires BLT to pay in cash the former owners of Viamedia an additional four amounts of R24.1 million, R24.1 million, R55 million and R112.5 million if certain profit warranties are achieved.

The potential undiscounted amount of all future payments that the Group could be required to make under this arrangement is between R0 and R215.6 million.

The fair value of the contingent consideration arrangement of R131 million was estimated by applying the income approach. The fair value estimates are based on a discount rate of 9%. For the first, second and third profit targets management has assumed a probability of 100%.

For the fourth profit target management has assumed a probability of 50%. This differs to the probability of 0% disclosed in the post-balance sheet acquisition of subsidiary note in the consolidated annual financial statements as at 31 May 2014.