Notes to the
consolidated
financial statements
continued
4 Acquisitions continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Assuming that the acquisition occurred on January 4, 2016, management reported on a pro forma basis consolidated net sales of €62,331 million
through January 1, 2017, and consolidated pro forma net income of €1,078 million. The pro forma information is based on the historical Ahold and
Delhaize quarters. The following main adjustments to the combined historical data were made to arrive at the pro forma information: i) exclusion of
the performance of remedy stores and other divestments; ii) exclusion of merger transaction costs; iii) inclusion of purchase price allocation effects;
iv) alignment of Global Support Office functions and related costs; and v) alignment of foreign exchange rates used in the translation of foreign
group entities.
Acquisition-related costs
Ahold and Delhaize incurred transaction costs of €135 million for banking fees, legal fees and other professional fees, of which €62 million has been
booked by Ahold and Delhaize in 2015 and €73 million in 2016. Transaction costs of €38 million (2015: €32 million) have been included in General
and administrative expenses as Restructuring and related charges and other.
The total value of the replacement awards is €9 million. The consideration for the business combination includes €4 million transferred to
employees of Delhaize when the acquiree’s awards were substituted by the replacement awards, which relates to past service. The balance of
€5 million will be recognized as post-acquisition compensation cost over the relevant service period.
Since the merger date, Delhaize contributed net sales of €11,001 million and a net income of €239 million (representing the results of the Delhaize
operating entities plus any remaining head office and other charges from the Delhaize entities) to the 2016 results.
(i) Under the terms of the merger, Delhaize shareholders were offered 4.75 ordinary shares in the Company for each share held in Delhaize.
On completion of the merger, 496,000,577 ordinary shares were issued. The fair value of the shares issued as part of the consideration paid was
based on the published share price on July 23, 2016, of €21.695 per share.
(ii) In accordance with the terms of the merger agreement, the Company exchanged certain equity-settled share-based payment awards held by
employees of Delhaize (the acquiree’s awards) for equity-settled share-based payment awards of the Company (the replacement awards).
Purchase consideration
The purchase consideration was €10,765 million. Goodwill recognized in the amount of €5,926 million, which at the date of this report is treated
as non-deductible for tax purposes, represents expected synergies from the combination of the operations. The transaction is expected to
be accretive to earnings in the first full year after completion, with all anticipated run-rate synergies to be fully realized in the third year after
completion. One-off costs of €350 million will be required to achieve synergies.
Purchase consideration
Ordinary shares issued (i)
Amount attributable to purchase consideration in respect of replacement awards issued (ii)
Total purchase consideration
million
10,761
4
10,765
