37. Acquisition of a subsidiary

Acquisition of Polskie Media S.A.

On 30 August 2013, following the fulfillment of the conditions precedent included in the preliminary and conditional agreements for the purchase of shares in Polskie Media S.A. (‘Polskie Media’) concluded on 28 March 2013 between Telewizja Polsat Sp. z o.o. (‘Telewizja Polsat’), subsidiary of Cyfrowy Polsat, and Karswell Limited and Sensor Overseas Limited, Telewizja Polsat has finalized the purchase of shares in Polskie Media comprising 100% of the share capital for the total amount of PLN 72,589. The consideration comprised the price for shares and adjustments related to enterprise value.

The sellers are related parties for Cyfrowy Polsat Group.

Polskie Media is a broadcaster of two channels distributed both in terrestrial and cable-satellite: TV4 and TV6. The acquisition of Polskie Media opens the possibility to increase advertising revenue based on the increasing reach as well as the synergies in the following areas: access and use of the programming content, technical, advertising, marketing and cross-promotions as well as back-office resources.

The Group uses the purchase accounting method for entities acquired under common control.

a) Consideration transferred

31 December 2013
Cash consideration 72,589
Total 72,589

b) Reconciliation of transactional cash flow

Cash transferred on acquisition (72,589)
Cash and cash equivalents received 8,784
Cash outflow in the period of 12 months ended 31 December 2013 (63,805)

c) Fair value of net assets as at the acquisition date

Fair values of assets and liabilities acquired as at 30 August 2013:

value as at the acquisition date (30 August 2013
Net assets:
Property, plant and equipment 1,970
TV4 brand (see note 18) 33,656
TV6 brand (see note 18) 9,344
Intangible assets 18,708
Programming assets 11,422
Inventory 5
Trade and other receivables 4,259
Other current assets 34
Cash and cash equivalents 8,784
Deferred tax liability (3,293)
Loans and borrowings (24,574)
Trade and other payables (22,497)
Value of total net assets 37,818

d) Fair value of goodwill

fair value as at the acquisition date (30 August 2013)
Purchase price of 100% shares 72,589
Fair value of net assets acquired (37,818)
Goodwill 34,771

The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations.

The revenue and net loss included in the consolidated income statement for the reporting period since 30 August 2013 contributed by Polskie Media S.A. amounted to PLN 31,189 and PLN 9,236, respectively. Had they been acquired on 1 January 2013 the revenue and loss included in the consolidated income statement would have amounted to PLN 2,945,181 and PLN 528,923, respectively.