Notes 6-10

6. Acquisitions and disposals of subsidiaries and minority interests

Scottish & Newcastle acquisition

On 28 April 2008, Scottish & Newcastle plc (‘S&N’) was acquired by Sunrise Acquisition Ltd (‘Sunrise’). The consortium agreement between Heineken and Carlsberg A/S regulates the allocation of the consideration, brands, businesses and separation steps to be completed after the acquisition. Based on the consortium agreement, Heineken has acquired 100 per cent of the voting rights of the S&N businesses in the United Kingdom, Finland, Portugal, United States and Ireland and 99.65 per cent of the voting rights in Belgium. Through the S&N acquisition, Heineken acquired 37.5 per cent of the voting rights in United Breweries Ltd. (India, included as joint venture). Furthermore, two Special Purpose Entities (SPEs) were acquired. These SPEs relate to a pub estate partnership and a logistic partnership in the UK. The consideration paid amounted to €2.7 billion with a net cash outflow of €2.8 billion.

Effect of S&N acquisition

The S&N acquisition had the following effect on Heineken’s assets and liabilities on acquisition date:

In millions of EUR Note Pre-
acquisition
carrying
amounts		 Fair
value
adjustments		 Recognised
values on
acquisition
date*
Property, plant & equipment 14 1,705 (198) 1,507
Intangible assets 15 514 1,025 1,539
Investments in associates and joint ventures 357 46 403
Other investments 434 (19) 415
Advances to customers 105 – 105
Deferred tax assets 18 2 25 27
Inventories 262 4 266
Trade and other receivables, prepayments and accrued income 971 (27) 944
Cash and cash equivalents 178 – 178
Loans and borrowings 24 (2,085) 106 (1,979)
Employee benefits (42) (183) (225)
Deferred tax liabilities 18 (296) (185) (481)
Provisions 28 (251) (5) (256)
Bank overdrafts (287) – (287)
Current liabilities (3,089) 10 (3,079)
Net identifiable assets and liabilities (1,522) 599 (923)
Goodwill on acquisition 15     3,651
Consideration paid 2,728
Net bank overdrafts acquired (109)
Net cash outflow 2,837
*
Beamish & Crawford is consolidated as per 3 October 2008, the date at which Heineken gained control.

All fair value adjustments up until 31 December 2008 have been incorporated in the recognised values on acquisition date.

On 3 October 2008 Heineken received unconditional approval from the Irish Competition Authority. Until that date Beamish and Crawford was classified as an available-for-sale investment with fair value changes in equity (other investments).

The S&N shareholdings in India are classified as joint ventures although legal proceedings have been filed by the joint venture partner of Heineken in United Breweries Limited as further explained in note 16.

The S&N acquired entities are fully integrated in the Heineken regional structure and the former S&N head office has been dismantled. Goodwill on the acquisition of S&N has been allocated to the Western Europe and Americas region for the purpose of impairment testing in line with the operational responsibility. Goodwill in Western Europe and the Americas is monitored on a regional level. Synergies in the Western European market are expected to be achieved as result of a stronger presence in Western Europe enabling Heineken to secure its position and to increase its market share through appropriate commercial investments. Synergies in the Americas are expected to be achieved as a result of a stronger position in the USA, Canada and export to the Caribbean. For both regions, cost synergies are expected through more efficient central purchasing, sourcing and selling in respect of both the S&N and Heineken brands.

The purchase price and the allocated fair values of assets and liabilities acquired have been determined on a provisional basis, because the final settlement with the consortium partner Carlsberg has not yet been completed and there remains uncertainty regarding certain positions such as the tax balances brought forward.

The S&N acquired businesses have been included for eight months in the year ended 31 December 2008. The contribution to revenue amounted to €2,159 million and results from operating activities and share of profit of associates and joint ventures amounted to €62 million, excluding the impact of exceptional restructuring costs and impairments – relating to the UK pub portfolio and the India investment– recognised in the eight-month period of €389 million. Amortisation of brands and customer relationships included, amounted to €49 million.

Had the S&N acquired businesses been included as from 1 January 2008, management estimates that the pro-forma contribution to revenue would have amounted to €3,063 million and pro forma results from operating activities and share of profit of associates and joint ventures to €14 million, excluding the impact of exceptional restructuring costs and impairments – relating to the UK pub portfolio and the India investment. Amortisation of brands and customer relationships included, would have amounted to €73 million. This pro-forma information does not purport to represent what our actual results would have been had the acquisition actually occurred on 1 January 2008, nor are they necessarily indicative of future results of operations. In determining the contributions, management has assumed that the fair value adjustments that arose on the date of the acquisitions would have been the same if the acquisitions had occurred on 1 January 2008.

Eichhof acquisition

On 29 August 2008 Heineken acquired 96.54 per cent of the voting rights of the beverage division of Eichhof Holding AG in Lucerne, Switzerland. After the completion of the tender offer a squeeze-out procedure was started. As at balance sheet date Heineken owned 100 per cent. The consideration paid amounted to €192 million with a net cash outflow of €190 million.

Effect of Eichhof acquisition

The Eichhof acquisition had the following effect on Heineken’s assets and liabilities on acquisition date:

In millions of EUR Note Pre-
acquisition
carrying
amounts		 Fair
value
adjustments		 Recognised
values on
acquisition
date
Property, plant & equipment 14 37 16 53
Intangible assets 15 2 36 38
Other investments 20 – 20
Inventories 14 1 15
Trade and other receivables, prepayments and accrued income 20 – 20
Cash and cash equivalents 2 – 2
Employee benefits – (19) (19)
Deferred tax liabilities 18 (7) (3) (10)
Provisions 28 – (3) (3)
Current liabilities (42) (1) (43)
Net identifiable assets and liabilities 46 27 73
Goodwill on acquisition 15   119
Consideration paid 192
Net cash and cash equivalents acquired (2)
Net cash outflow 190

The Eichhof acquired entities have been fully integrated in Heineken Switzerland. Goodwill on the acquisition of Eichhof has been allocated to the Western European region for the purpose of impairment testing in line with the operational responsibility. Goodwill in Western Europe is monitored on a regional level. Synergies in the Western European market are expected to be achieved as result of a stronger presence in Western Europe enabling Heineken to secure its position and to grow its market share through appropriate commercial investments. Cost synergies are expected through more efficient central purchasing, sourcing and selling in respect of both the Eichhof and Heineken brands.

The fair values of assets and liabilities acquired have been determined on a provisional basis and will be completed in 2009.

The contribution to revenue amounted to €44 million and to results from operating activities -€7 million, due to significant restructuring costs. If the acquisition had occurred on 1 January 2008, management estimates that revenue would have been €86 million higher and results from operating activities would have been €16 million higher.

This pro forma information does not purport to represent what our actual results would have been had the acquisition actually occurred on 1 January 2008, nor are they necessarily indicative of future results of operations. In determining the contributions, management has assumed that the fair value adjustments that arose on the date of the acquisitions would have been the same if the acquisitions had occurred on 1 January 2008.

Effect of other acquisitions and disposals

In addition to the acquisition of S&N and Eichhof, other acquisitions and disposals occurred during 2008. Breweries in Serbia, Romania, Belarus, Czech Republic, Sierra Leone and Algeria, and a soft drinks company in Tunisia were acquired. The following acquisition dates and percentages of voting rights apply to these other acquisitions:

Entity acquired Country of
incorporation		 Acquisition
date		 % of
voting rights
as per
balance sheet
OJSC, Rechitsapivo’1 Belarus 1 July 2008 80.8
Drinks Union a.s. Czech Republic 1 July 2008 98.5
United Serbian Breweries EUC LLC Serbia 12 February 2008 72
Central Europe Beverages B.V. The Netherlands 22 August 2008 72
Bere Mures S.A. Romania 8 April 2008 100
Sierra Leone Brewery Ltd. Sierra Leone 23 June 2008 83.1
Tango s.a.r.l. Algeria 14 January 2008 100
Société Nouvelle des Boissons Gazeuses S.A. (‘SNBG’) Tunisia 28 February 2008 49
1
Excluding treasury shares (will be cancelled in the course of 2009).

The aggregate consideration paid amounts to €548 million.

United Serbian Breweries EUC LLC (previously known as Brauerei MB) was acquired at 12 February 2008. On 22 August 2008, Heineken contributed United Serbian Breweries EUC LLC into Central Europe Beverages B.V., a company previously owned by Efes Breweries International, effectively gaining control over Central Europe Beverages B.V. On 30 October 2008 Heineken sold its 100% subsidiary Dinal (Kazakhstan) to Efes Karaganda (a company owned by Efes Breweries International). On the same date Heineken purchased a 28 per cent share in Efes Karaganda that is further disclosed in note 16.

On 30 June 2008 Heineken sold its investment in Brasserie Saint-Omer.

The shareholders agreement of SNBG provides Heineken with de facto control. As such SNBG is classified as a subsidiary.

The other acquisitions and disposals had the following effect on Heineken’s assets and liabilities on acquisition date:

In millions of EUR Note Pre-
acquisition
carrying
amounts		 Fair
value
adjustments		 Total
other
acquisitions		 Total
disposals
Property, plant & equipment 14 243 (48) 195 (35)
Intangible assets 15 8 22 30 –
Investments in associates and joint ventures 4 – 4 (11)
Other investments 14 (3) 11 (20)
Deferred tax assets 18 4 9 13 (6)
Inventories 28 (1) 27 (46)
Trade and other receivables, prepayments and accrued income 47 4 51 (26)
Cash and cash equivalents 20 – 20 (13)
Minority interests (46) 10 (36) 1
Loans and borrowings 24 (51) 4 (47) 3
Employee benefits (1) – (1) –
Deferred tax liabilities 18 (7) (7) (14) 7
Provisions 28 (2) – (2) 2
Bank overdrafts (25) – (25) 16
Current liabilities (61) (5) (66) 63
Net identifiable assets and liabilities 175 (15) 160 (65)
Goodwill on acquisitions 15   388 –
Consideration paid/(received), satisfied in cash 548 (65)
Net bank overdrafts acquired/Net bank overdrafts disposed of 5 (3)
Net cash outflow/(inflow) 553 (68)

The fair values of assets and liabilities of some acquisitions have been determined on a provisional basis, and will be completed in 2009.

The acquired entities in Central and Eastern Europe have been fully integrated in the Central and Eastern European region. Goodwill on these acquisitions amounting to €232 million has been allocated to the Central and Eastern European region for the purpose of impairment testing in line with the operational responsibility. Goodwill in Central and Eastern Europe is monitored at a regional level. Synergies in the Central and Eastern European market are expected to be achieved as result of a stronger presence in Central and Eastern Europe enabling Heineken to grow its market share through appropriate commercial investments. Cost synergies are expected through more efficient central purchasing, sourcing and selling in respect of both the newly acquired and Heineken brands.

In respect of the other newly acquired entities acquired in Africa, goodwill amounting to €149 million has been allocated to the individual operating companies. Although synergies are achieved on a regional basis these entities are less integrated in the region and therefore goodwill is monitored on an individual country basis.

The total contribution of these other acquisitions to revenue amounted to €138 million and to results from operating activities -€34 million. If these acquisitions had occurred on 1 January 2008, management estimates that revenue would have been €38 million higher and results from operating activities would have been €8 million lower. This pro forma information does not purport to represent what our actual results would have been had the acquisition actually occurred on 1 January 2008, nor are they necessarily indicative of future results of operations. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of the acquisitions would have been the same if the acquisitions had occurred on 1 January 2008.

Provisional accounting Krušovice and Syabar acquisition

In the consolidated financial statements as at and for the year ended 31 December 2007, the fair values of assets and liabilities of the acquisition of Krušovice and Syabar were determined on a provisional basis. The purchase price adjustments for Krušovice and Syabar have been finalised without significant changes.