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Telkom Integrated Report 2017
15.1.2 African Arete Proprietary Limited (African Arete) - continued
On 1 November 2016 BCX acquired the entire issued ordinary share capital of African Arete.
The total purchase consideration was R19 million, which was settled in cash.
African Arete provides innovative business solutions based on information and communication technology and runs ICT systems and
manages products, services and solutions for a wide range of customers.
The merger will enable BCX to expand its existing offerings while, at the same time, providing scale in IT services, which will help reinforce
Telkom’s core connectivity business and enhance BCX’s strategy.
The acquisition has been accounted for using the acquisition method. The date of acquisition is 1 November 2016 and the financial
statements include the African Arete results for the five months ended 31 March 2017.
2017
Rm
Assets
Trade and other receivables
7
Total assets
7
Liabilities
Trade and other payables
3
Income tax payable
1
Total liabilities
4
Total identifiable net assets at fair value
3
Non-controlling interest at proportional share of net assets
–
Goodwill arising on acquisition (provisional)
16
Purchase consideration transferred
19
Analysis of cash flows at acquisition:
Net cash outflow on acquisition of the subsidiary (included in cash flows from investing activities)
Cash paid
19
Net cash outflow on acquisition
19
The fair value of the identifiable assets and liabilities at acquisition date was determined as follows:
At the date of the acquisition, the fair value of the trade receivables approximated its carrying value. The gross amount of trade receivables
is R6.5 million.
From the date of acquisition, African Arete has contributed R21.2 million of revenue and R1.2 million to the net profit before tax from the
continuing operations of the BCX group. If the acquisition had taken place at the beginning of the year, BCX revenue from continuing
operations would have been R13 905 million and the BCX group profit from continuing operations for the period would have been
R1 066 million.
The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of
African Arete with those of the BCX group. The goodwill is not deductible for income tax purposes.
Transaction costs of less than R1 million, which include isssue costs, have been expensed since the inception of the acquisition.
These expenses were recognised in service fees. The fair value of intangible assets and goodwill has been measured on a provisional
basis pending the completion of an independent valuation.
If new information is obtained within one year of the acquisition date on facts and circumstances that existed at the acquisition date, the
above amounts will be revised.
15.1.3 Relational Database Consulting Proprietary Limited (RDC)
On 1 April 2016, Business Connexion Group Limited acquired the entire share capital of RDC.
The total purchase consideration amounted to R30 million, funded by a cash payment of R16 million and a deferred purchase consideration
of R14 million payable on achieving financial targets.
RDC is a market leader in Database and Operating System administration with a strong focus on Oracle.
The merger will enable the group to expand its existing offerings while, at the same time, providing scale in IT services, which will help
reinforce the group’s core connectivity business and enhance convergence strategy. Their expanded range of services includes Oracle
E-Business Suite, Oracle Fusion Middleware, Oracle Solaris Support and Oracle Sales.