3 Scope of Consolidation and Business Combinations

All in all, and including Vonovia SE, 189 companies (Dec. 31, 2015: 190) – thereof 168 (Dec. 31, 2015: 158) domestic companies and 21 (Dec. 31, 2015: 32) foreign companies – have been included in the consolidated financial statements as of December 31, 2016. In addition, three domestic companies were included as joint ventures (Dec. 31, 2015: four).

For all subsidiaries included in the consolidated financial statements, the reporting date is December 31.

The list of Vonovia shareholdings is appended to the Notes to the consolidated financial statements as an integral part thereof.

Companies that have made use of the exemption provision set out in Section 264 (3) of the German Commercial Code (HGB) are marked accordingly in the list of shareholdings.

The changes as of December 31, 2016, compared with December 31, 2015, result from the acquisition of the GRAINGER Group (four companies), the IVV Group (eight companies), three further acquisitions, nine mergers, two sales, three accruals and three liquidations.

The measurement period for the first-time recognition of the merger with GAGFAH S.A., Luxembourg, ended on March 6, 2016.

During the first half of 2016, the obligation under “multiemployer plans” recognized in connection with the acquisition of the SÜDEWO Group was updated and stated at a value of € 15.7 million under “other provisions” (as of Dec. 31, 2015: € 12.7 million). Taking into account the deferred tax liabilities resulting from this change in the amount of € 0.9 million, the goodwill from the acquisition of the SÜDEWO Group increased by € 2.1 million to € 346.0 million. The measurement period for the first-time recognition of the merger with the SÜDEWO Group ended on July 8, 2016.

Acquisition of conwert Immobilien Invest SE Completed after the Reporting Date for the Consolidated Financial Statements

In connection with the voluntary public takeover offer that Vonovia SE made on November 17, 2016 to the shareholders of conwert Immobilien Invest SE, Vienna (conwert), a total of 72,902,498 or 71.54% of the shares were tendered after the end of the acceptance deadline on December 19, 2016, 682,852 of which were tendered as part of an alternative exchange offer. This corresponds to 339,135 new Vonovia shares to be created.

The acquisition date, at which Vonovia SE obtained control of the conwert Group, is January 10, 2017. Vonovia’s non-cash capital increase, using authorized capital, was entered in the commercial register of Düsseldorf Local Court on this day, which was formulated as a suspensive condition of the takeover offer. This transaction shall be treated as a business combination in accordance with IFRS 3.

The provisional consideration transferred for the acquisition of 71.54% of the shares in the subscribed capital of the conwert Group comprises the following:

in € billion

 

 

 

 

 

Net cash purchase price component

 

1.17

Equity instruments

 

0.01

Total consideration

 

1.18

The cash offer involves the payment of the cash purchase price of € 16.16 per share in conwert.

The share-based component relates to 339,135 no-par value shares from the non-cash capital increase of Vonovia SE, which were exchanged by Vonovia SE for the conwert shares. This share-based component was valued at the XETRA closing price of € 31.48 per share on January 10, 2017, and amounts to € 10.7 million.

The provisional allocation of the total purchase price to the acquired assets and liabilities (PPA) of the conwert Group as of the date of first-time consolidation is based on a preliminary external valuation report that was commissioned for this purpose to calculate the fair values of these assets and liabilities.

The assets and liabilities assumed in the course of the business combination had the following provisional fair values as of the date of first-time consolidation:

in € billion

 

 

 

 

 

Investment properties

 

2.47

Cash and cash equivalents

 

0.03

Assets held for sale

 

0.35

Fair value of other assets

 

0.14

Total assets

 

2.99

Non-controlling interests

 

0.43

Non-derivative financial liabilities

 

1.23

Deferred tax liabilities

 

0.17

Fair value of other liabilities

 

0.16

Total liabilities

 

1.99

Fair value net assets

 

1.00

Consideration

 

1.18

Goodwill

 

0.18

The goodwill represents synergies from the future integration of the conwert Group.

Out of the trade receivables that were acquired, an amount of € 17.7 million is likely to have been uncollectible at the time of acquisition. The gross amount of the acquired trade receivables was € 75.3 million. The net carrying amount, which corresponds to the , was € 57.6 million.

In the 2016 fiscal year, transaction costs of € 9.9 million were recognized as other operating expenses.

A total of 121 domestic and 87 foreign companies of the conwert Group will be newly included in the scope of consolidation as of the date of acquisition.

Pursuant to Article 19 (3) of the Austrian Takeover Act, the acceptance deadline is extended by three months, starting at the time the result is announced, namely until 5 p.m. local time in Vienna on March 23, 2017 (grace period), for those shareholders who have not yet accepted the offer. The conwert shareholders who want to accept this offer will be given the option, as with the first tender period, to choose between a cash offer and an alternative exchange offer. The cash offer involves the payment of the cash purchase price of € 16.16 per share in conwert. As part of the exchange offer, the conwert shareholders will receive 74 shares in Vonovia for every 149 shares in conwert. This constitutes a linked transaction to the actual share purchase and will be reported in the first quarter of 2017 accordingly.

Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.