Wärtsilä Corporation Financial statements bulletin 2015

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Acquisitions
L-3 Marine Systems International
On 31 May 2015 Wärtsilä acquired L-3 Marine Systems International (MSI) from NYSE-listed L-3 Communications Holdings Inc. The preliminary consideration of the transaction is EUR 293 million.
MSI has extensive experience in supplying automation, navigation and electrical systems, dynamic positioning technology, as well as sonar and underwater communications technology for a variety of vessel types and offshore installations. Wärtsilä’s strong position in the development of technologies that enhance operational efficiency will be further strengthened with the addition of MSI’s broad range of capabilities.
The following tables summarise the preliminary amounts for the consideration paid for MSI, the cash flow from the acquisition and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.
Preliminary consideration MEUR
Consideration transferred 293
Total consideration transferred 293
Preliminary cash flow from the acquisition MEUR
Consideration paid in cash 293
Cash and cash equivalents of the acquired companies -36
Total cash flow from the acquisition 258
Provisional values of the assets and liabilities arising from the acquisition MEUR
Intangible assets 132
Property, plant and equipment 8
Inventories 129
Trade and other receivables 70
Deferred tax assets 23
Cash and cash equivalents 36
Total assets 398
Provisions 19
Pension obligations 65
Trade payables and other liabilities 146
Deferred tax liabilities 46
Total liabilities 277
Total net assets 121
Preliminary goodwill 172
The preliminary fair values of acquired identifiable intangible assets at the date of acquisition (including technology, customer relationships and trademarks) amounted to EUR 132 million. The fair value of current trade receivables and other receivables is approximately EUR 70 million. The fair value of trade receivables does not include any significant risk.
The preliminary goodwill of EUR 172 million reflects the value of know-how and expertise in marine electrical & automation. Wärtsilä foresees that the new unit will capture new market opportunities and improve the operational efficiency of its customers. The goodwill recognised for MSI is not tax deductible.
During 2015 the Group incurred acquisition-related costs of EUR 2 million related to external legal fees and due diligence costs. The costs have been included in the other operating expenses in the consolidated statement of income. The total acquisition-related costs are EUR 4 million.
During June-December, MSI contributed EUR 264 million to order intake and EUR 263 million to net sales. Contribution to the operating result of the Group was EUR 14 million. If the acquisition had occurred on 1 January 2015, management estimates that consolidated net sales would have been EUR 5,197 million. The impact in the consolidated operating result for the reporting period would not have been significant. In determining these amounts, management has assumed that the fair value adjustments, which arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2015.

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