Note 2: Scope of consolidation

Acquisition of BASF’s Industrial Coatings business

On December 14, 2016, we acquired BASF’s Industrial Coatings business. The transaction included two manufacturing plants, technologies, patents and trademarks, as well as securing supply to customers worldwide. The business supplies products for a number of end uses, including coil, furniture foil and panel coatings, wind energy and general industry, and commercial transport. The acquisition strengthened our position in the important coil coatings market and fits well with our existing business, allowing us to offer essential solutions to our customers.

Recognized fair values at acquisition

in € millions

BASF's Industrial Coatings business

Other acquisitions

Total

Goodwill

221

2

223

Other intangibles

165

165

Property, plant and equipment

4

46

50

Investment in associates and joint ventures

(9)

(9)

Inventories

18

7

25

Trade and other receivables

1

3

4

Cash and cash equivalents

2

2

Provisions

(17)

(17)

Deferred tax assets/(liabilities)

(3)

(9)

(12)

Trade and other payables

(2)

(2)

Net identifiable assets and liabilities

389

40

429

Recognized in the statement of income

(17)

(17)

Purchase consideration

389

23

412

Cash and cash equivalents acquired

(2)

(2)

To be received/(paid) in 2017 and later years

9

(3)

6

Net cash outflow

398

18

416

The goodwill is attributable to the expected synergies of combining the BASF’s Industrial Coatings business with our existing business. The total amount of goodwill that is expected to be deductible for tax purposes is €164 million.

As a result of the closing date of December 14, 2016, the revenue and contribution of the acquired business was insignificant. As the purchase price allocation is provisional it was deemed impracticable to disclose information on the consolidated pro-forma revenue and operating income for 2016 as if the acquisition had occurred on January 1, 2016.

Acquisition related costs of €13 million are included in Other results in the statement of income and in the Net cash from operating activities in the statement of cash flows.

Other acquisitions

Other acquisitions are deemed to be individually immaterial. Other acquisitions include the acquisition of the remaining 50 percent stake in EkO Peroxide LLC in January 2016, which mainly impacted the statement of income on the line Results from associates and joint ventures. EkO Peroxide LLC was treated as consolidated company thereafter.

In March 2015, we obtained the remaining 50 percent stake in Delesto B.V., which was treated as consolidated company thereafter.

Divestments

In 2016, no significant divestments occurred.

Discontinued operations

The results and net cash out from operating activities both in 2015 and 2016 mainly relate to settlements for previously divested businesses.

Discontinued operations

in € millions

2015

2016

Results related to discontinued operations in previous years

(3)

(3)

Tax related to discontinued operations in previous years

9

1

Profit for the period

6

(2)

Cash flows from discontinued operations

in € millions

2015

2016

Net cash from operating activities

(6)

(6)

Cash flows from discontinued operations

(6)

(6)

Material subsidiaries

The Consolidated financial statements comprise the assets, liabilities, income and expenses of approximately 360 legal entities. We consider legal entities material when they represent, for at least two subsequent years, more than 5 percent of either revenue or operating income (before ) or based on qualitative aspects. Material subsidiaries included in the table are 100 percent owned and meet these criteria.

Material subsidiaries

Legal entity

Principal place of business/country of corporation

Akzo Nobel Coatings Inc.

United States

Akzo Nobel Pulp and Performance Chemicals AB

Sweden

Akzo Nobel Industrial Chemicals B.V.

The Netherlands

Imperial Chemical Industries Limited

United Kingdom

Operating income

Operating income is defined in accordance with IFRS and includes the relevant incidentals.

Incidentals

Incidentals are special charges and benefits, results on acquisitions and divestments, major impairment charges and charges related to major legal, anti-trust and environmental cases.