Xara Acquisition (Fiscal Year 2006/07)
By purchase and share transfer agreement dated January 30, 2007, MAGIX AG purchased 100% of the shares in Xara Group Limited (hereinafter referred to as “Xara”). The purchase price for the shares is broken down into three components:
- The first purchase price component amounts to kEUR 1,517 and was payable in cash upon signing the agreement. The first purchase price component is reported in the consolidated cash flow statement together with the loan liabilities to third parties assumed, which MAGIX AG has agreed to settle as part of the purchase agreement, as well as incidental acquisition costs of kEUR 98 as cash paid for the acquisition and stepping up of shares in subsidiaries (EUR 2,404).
- The second purchase price component was issued in the form of Qualifying Corporate Bonds (hereinafter referred to as “QCBs”). According to the conditions for the QCBs, MAGIX AG issues a secured convertible bond without options that falls due for cash settlement on September 30, 2009. The present value of the QCBs amounts to kEUR 1,348 as of the cut-off date of the purchase agreement (reported under other liabilities/non-current portion). MAGIX AG pledged fixed-term deposits in favor of the bearers of the convertible bond to secure the convertible bond (reported under other financial assets). The separation of the funds used to settle the QCBs from the cash and cash equivalents is reported in the consolidated cash flow statement at the amount of the pledged fixed-term deposits as cash paid for the acquisition and stepping up of shares in subsidiaries (EUR 1,452).
- The third purchase price component will be reliably calculated on the basis of future sales and earnings on September 30, 2009. The management board of MAGIX AG assumes that the third purchase price component will be a conditional purchase price payment. Since it is not possible to determine the fair value only the first and second purchase price components have been considered as cost for the shares purchased.
The business combination was recorded as follows in the consolidated balance sheet in the course of first-time consolidation:
Xara reports negative equity of kEUR -761 on the balance sheet as of the cut-off date of the purchase agreement. The difference between the cost of the shares in Xara (first and second purchase price tranche), the incidental acquisition costs (kEUR 98 ) and the carrying amount of the equity of Xara totaling for the time beeing to kEUR 3,724 relates to hidden reserves in connection with the customer base at the Company (approx. kEUR 1,438), software products internally developed by Xara (kEUR 861) and goodwill (kEUR 2,116). Deferred tax liabilities of kEUR 689 relate to the customer base and internally developed software products. The acquired customer base will be amortized over an estimated useful life of ten years, while the software products purchased will be amortized over an estimated useful life of five years.
Xara recorded sales revenue of approx. kEUR 1,534 and net income for the year of kEUR 95 in the fiscal year 2006. In the fiscal year 2006/2007, Xara contributed sales revenue of kEUR 766 to MAGIX’s group sales and earnings and net income for the year of kEUR 30. The reversal of hidden reserves from the purchase price allocation reduced earnings (before income taxes) in the consolidated financial statements of the MAGIX Group by kEUR 210 in the fiscal year 2006/2007.
Founding of Catooh Corp. (Fiscal Year 2006/2007)
In the fiscal year 2006/2007, MAGIX AG founded Catooh Corp., Las Vegas, Nevada, USA, as a wholly owned subsidiary by way of cash contribution (USD 100). The Company will be involved in the MAGIX Group’s new online service Catooh. The company did not record any material contributions to sales revenue or earnings in the current fiscal year.