On January 2, 2014, Wacker Biotech GmbH, a WACKER subsidiary, acquired 100 percent of the shares in Scil Proteins Production GmbH, based in Halle, Germany, by means of a share deal. The acquisition was an opportunity for WACKER BIOSOLUTIONS to strengthen and expand its production capacities for therapeutic proteins. Scil Proteins Production GmbH has experience in protein refolding. Refolding is a key process step for achieving the desired active properties in proteins that cannot be produced in an active form in bacterial cells. This know-how represents a significant addition to WACKER BIOSOLUTIONS’ process chain. WACKER took over the company’s production facilities as well as its patent portfolio and customer base.

The purchase price for this company amounted to some € 14 million and comprised a lump-sum payment and milestone payments. These were taken into account during purchase price allocation. The milestone payments essentially depend on the achievement of various production, technology and marketing targets. Though the specified milestones had not yet been reached as of December 31, 2014, WACKER expects them to be reached in 2015.

At the time of the acquisition, fair value of the acquired assets totaled € 22.7 million, with € 11.2 million in noncurrent assets and € 11.5 million in current assets. Fair value of the acquired liabilities amounted to € 9.2 million, with € 4.3 million in noncurrent liabilities and € 4.9 million in current liabilities. The transaction resulted in a small amount of goodwill of € 0.3 million. The purchase price allocation was concluded on March 31, 2014. No substantial impact on the Group’s sales and earnings resulted from the purchase.

On January 24, 2014, WACKER signed a contract to take over the majority of the shares in the Singapore-based joint venture Siltronic Samsung Wafer Pte. Ltd. (SSW), which had previously been jointly managed by Siltronic and Samsung on a 50:50 basis. Siltronic subscribed new shares in a capital increase for a total of SG$ 150 million (equivalent to € 86.5 million) and now holds a 77.7-percent stake in the company. Samsung did not subscribe any additional shares in the company, and will carry the company exclusively as a non-controlling interest to maintain good delivery relationships. Following the acquisition of a majority stake, the company was renamed Siltronic Silicon Wafer Pte. Ltd., Singapore.

Siltronic Silicon Wafer Pte. Ltd., Singapore, is a production site for 300 mm wafers. Due to the declining prices for 300 mm wafers and high depreciation, the company posted negative equity as of the end of fiscal 2013. When modifying the joint-venture agreement, the partners agreed to refinance external debt.

To do so, Siltronic and Samsung made payments to pay off € 195.9 million of financing from external banks. In addition to the capital increase, Siltronic agreed to grant a shareholder loan totaling € 28.6 million and make advance payments for future deliveries amounting to € 20.0 million. Samsung also agreed to make advance payments for future deliveries amounting to € 53.3 million that will serve to pay off external financing. As a result, € 195.9 million of the existing total external debt at the time of acquisition (€ 227.6 million) was paid off. The debt repaid by WACKER was reported in the Group’s statement of cash flows under cash flow from financing activities. These transactions had no impact on earnings.

The previously held equity interest in Siltronic Silicon Wafer Pte. Ltd. accounted for using the equity method was posted with a value of zero due to cumulative losses at the time of initial full consolidation. Further losses from this investment amounting to € 20.6 million were offset with a shareholder loan classified as a net investment. A valuation carried out by an external expert using an actuarial model did not result in any value adjustment of the previously held equity interest. The valuation was based on company cash flow planning. As a result of the transition to full consolidation, foreign currency translation adjustments previously recognized directly in equity were realized in the income statement as a non-cash gain of € 14.9 million.

The existing contractual relationships between Siltronic and SSW were recognized at fair value or contracted at market prices. These involved shareholder loans issued by Siltronic in the amount of € 93.0 million and a shareholder loan carried as a net investment in the amount of € 49.2 million. All shareholder loans have the option of conversion to equity. In addition, there were prepayments and trade receivables or trade payables in the amount of € 14.3 million. Furthermore, there was a license agreement, a long-term supply contract with SSW for the delivery of polysilicon and an obligation to accept delivery of 300 mm wafers. In addition to the adjustment of € -20.6 million recorded in 2013 in accordance with the equity method, the valuation of the net investment resulted in no additional impact on earnings.

The € 86.5 million of the capital increase paid by Siltronic in cash did not fully reflect the value of the newly acquired stake in SSW. An amount of € 41.3 million was attributable to accumulated losses and thus increased the value of the remaining non-controlling interest. Of this, € 20.6 million of the net investment’s valuation was already accounted for in 2013. A further € 20.7 million was recognized in profit and loss in connection with the capital increase in Q1 2014.

Exchange-rate gains of € 14.9 million from the disposal of the previously held equity interest and the compensation of SSW’s accumulated losses in the amount of € 20.7 million resulted in an overall loss on disposal of € 5.8 million, which was recognized under other operating expenses.

The purchase price allocation was concluded on June 30, 2014. Only minor changes were made to the preliminary fair values of assets and liabilities. The following table shows the fair values of the assets and liabilities at the acquisition date:

Fair Value of SSW Assets and Liabilities

The acquired receivables had a fair value of € 8.4 million and solely comprised trade receivables. The fair value corresponded to the gross value of the receivables.

Samsung’s non-controlling interest in equity amounted to € 12.5 million.

In 2014, SSW posted sales of € 165.6 million, EBITDA of € 32.2 million and a net result for the year of € -52.0 million. The company was included in WACKER’s consolidated financial statements as of January 1, 2014.

Acquisition costs incurred in connection with the transactions were only minor, and were recorded in the statement of income.