4. Discontinued operations
On 30 March 2023 Galenica announced the combination of the business activities of the specialty pharmacy Mediservice Ltd. (including Curarex swiss AG) and the online pharmacy shop-apotheke.ch in a strategic partnership with Redcare Pharmacy N.V. The closing of the transaction occurred on 16 May 2023.
Through the transaction, Galenica sold 51% of the shares of Mediservice Ltd. to Redcare Pharmacy N.V. The total purchase consideration amounted to CHF 215.5 million, consisting of a 6.1% investment in the listed company Redcare Pharmacy N.V., Netherlands with a fair value of CHF 109.5 million and the retained 49% participation in Mediservice Ltd. (including the online pharmacy shop-apotheke.ch) with a fair value of CHF 106.0 million. The remaining 49% participation in Mediservice Ltd. is accounted for as an investment in an associate.
At the date of disposal, the purchase consideration was reduced by an estimated amount of CHF 10.6 million which is contingent on net working capital developments as well as certain market developments and will become due between 2024 and 2026. At year end the remeasurement of the contingent consideration liability resulted in a change in fair value of CHF 7.7 million which was allocated to the net profit from discontinued operations. The transaction resulted in a gain on sale of CHF 119.4 million. As the purchase consideration received are non-cash items, the net cash flow from the disposal amounted to minus CHF 2.1 million which includes CHF 1.3 million cash disposed and CHF 0.8 million transaction costs and is shown as net cash flow from sale of subsidiaries in the consolidated statement of cash flows.
With the transaction Galenica lost control over Mediservice Ltd. (including Curarex swiss AG) and therefore derecognised the assets and liabilities of the business unit. The business of Mediservice Ltd. (including Curarex swiss AG) represented a separate major line of business for Galenica and was therefore classified as discontinued operations and the prior period was restated accordingly.
Gain on sale of discontinued operations
|
in thousand CHF |
2023 |
|
Fair value of received equity instruments |
109,456 |
|
Fair value of retained at equity investment in former subsidiary |
106,011 |
|
Contingent considerations |
–10,594 |
|
Total considerations received / interest retained |
204,873 |
|
|
|
|
Carrying amount of net assets disposed |
–86,776 |
|
Transaction costs |
–813 |
|
Income taxes related to the sale of the discontinued operations |
–5,515 |
|
|
|
|
Gain on sale of discontinued operations as per date of disposal |
111,769 |
|
|
|
|
Net remeasurement of change in fair value of contingent consideration liabilities related to sale of discontinued operations |
7,663 |
|
Gain on sale of discontinued operations |
119,432 |
The table below shows the financial performance of the discontinued operations.
Statement of income of discontinued operations
|
in thousand CHF |
1.1.– 16.5.2023 |
1.1.– 31.12.2022 |
|
Net sales |
164,487 |
445,907 |
|
Other income |
18 |
44 |
|
Expenses |
–163,238 |
–435,939 |
|
Earnings before tax (EBT) from discontinued operations |
1,266 |
10,012 |
|
|
|
|
|
Income taxes |
–251 |
–1,500 |
|
|
|
|
|
Net profit from discontinued operations |
1,015 |
8,512 |
The table below shows the financial position of the discontinued operations at the date of disposal.
Financial position of the discontinued operations at the time of disposal
|
in thousand CHF |
16.5.2023 |
|
Cash and cash equivalents |
1,330 |
|
Trade and other receivables |
49,444 |
|
Inventories |
18,168 |
|
Other current assets |
2,583 |
|
Current Assets |
71,525 |
|
|
|
|
Property, plant and equipment |
681 |
|
Right-of-use assets |
4,025 |
|
Intangible assets |
67,517 |
|
Other non-current assets |
93 |
|
Non-current assets |
72,316 |
|
|
|
|
Total disposed assets |
143,841 |
|
|
|
|
Financial liabilities |
24,143 |
|
Lease liabilities |
647 |
|
Trade and other payables |
24,817 |
|
Other liabilities |
1,999 |
|
Current liabilities |
51,607 |
|
|
|
|
Lease liabilities |
3,581 |
|
Deferred tax liabilities |
1,637 |
|
Employee benefit liabilities |
240 |
|
Non-current liabilities |
5,458 |
|
|
|
|
Total disposed liabilities |
57,065 |
|
|
|
|
Disposed net assets |
86,776 |
Accounting principles discontinued operations
A disposal group is classified as a discontinued operation if it represents a separate major line of business or geographical business unit. Discontinued operations are not included in the result from continuing operations and are reported separately in the consolidated statement of income as profit from discontinued operations. The prior period amounts in the income statement and in the consolidated statement of cash flows are adjusted for comparison purposes. The elimination of intercompany transactions between continuing and discontinued operations is adjusted in order to reflect the impact of these transactions in continuing operations going forward. Therefore, intercompany transactions with the discontinued operations are treated as third parties transaction in the continuing operation.