Scope of Consolidation

The consolidated financial statements include the financial statements of Wacker Chemie AG and all companies over which Wacker Chemie AG has direct or indirect control as defined in IFRS 10, or can exercise joint control as defined in IFRS 11. Depending on their structure, companies over which Wacker Chemie AG can exercise joint control are included in the consolidated financial statements either proportionately (line-by-line) or are accounted for using the equity method. In the absence of other limiting contractual agreements, holding a majority of the voting rights usually leads to control. Joint control generally exists when voting rights are equally balanced, except if other (contractual) rights result in control by one shareholder. Currently, one company with joint control is consolidated using the equity method.

Associates in which Wacker Chemie AG can exercise significant influence as defined in IAS 28 are likewise accounted for using the equity method. Significant influence is presumed if Wacker Chemie AG directly or indirectly holds 20 percent of the voting rights in the investment, unless it can be clearly demonstrated that this is not the case.

Structured entities are also consolidated in the manner described in IFRS 10 if the economic substance of the relationship indicates the existence of control. WACKER includes one such structured entity, a special fund, in its consolidated financial statements. Wacker Chemie AG has contributed assets to this fund. The fund was established exclusively for WACKER, and all shares in the fund are held by WACKER. Contractual provisions of this fund qualify it as a structured entity as defined in IFRS 10.

Companies in which Wacker Chemie AG has a shareholding of less than 20 percent or does not exercise significant influence are shown as other investments under noncurrent financial assets.

A detailed list of the companies included in the consolidated financial statements and of Wacker Chemie AG’s entire shareholdings is shown in the Breakdown of Shareholdings section in accordance with Sections 285 and 313 of the German Commercial Code.

A total of 55 companies were included in the consolidated financial statements as of December 31, 2018 (Dec. 31, 2017: 52 companies). Compared with December 31, 2017, the scope of consolidation changed as follows:

On April 16, 2018, WACKER acquired a production site for biopharmaceutical proteins in Amsterdam (Netherlands) from SynCo Bio Partners Luxembourg S. à. r. l., Luxembourg – along with the associated business portfolio.

WACKER Chemical Finance B. V., Zaanstad, Netherlands, a subsidiary of Wacker Chemie AG, concluded an agreement on December 14, 2017, to acquire all the shares in SynCo Bio Partners Holding B. V. Amsterdam, Netherlands. The closure of sale took effect (closing) on April 16, 2018. The above-mentioned is the parent company of the operating subsidiary SynCo Bio Partners B. V. Amsterdam, Netherlands. This subsidiary essentially operates two fermentation lines and a sterile fill-and-finish facility, and has around 100 employees. The facilities meet Good Manufacturing Practice (GMP) quality standards, have already been inspected by the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA), and have been certified for the manufacture of specific pharmaceutical proteins.

In closing this deal, WACKER gained control (as defined in IFRS 10) over SynCo Bio Partners Holding B. V. and its subsidiaries. WACKER intends to use these additional fermentation lines to further strengthen and expand its biotech business.

The purchase price of the company amounted to €23.5 million and comprised a one-off payment in cash and an amount retained for subsequent adjustments, as well as the assumption of debt. These were accounted for in the purchase price allocation. Aside from this fixed amount, a contingent purchase price component (earn-out payment) was determined. This is based on the company’s EBITDA through 2021. It was not included in the purchase price due to current sales and earnings trends, and future expectations.

The fair value of acquired assets at the time of the acquisition amounted to €29.9 million, of which €25.4 million was noncurrent assets and €4.5 million current assets. Cash and cash equivalents accounted for €1.0 million of the acquired assets. The fair value of the acquired liabilities, which are exclusively current liabilities, came to €9.0 million. The purchase price allocation was concluded on December 31, 2018, and resulted in goodwill of €2.6 million. The company achieved sales of €4.3 million and EBITDA of €-6.4 million in 2018. The transaction costs, which were of a minor nature, were recognized as an expense.

Two acquired companies were renamed WACKER Biotech Holding B. V. and WACKER Biotech B. V.

On March 15, 2017, WACKER reduced its stake in Siltronic AG from 51.8 percent to 30.8 percent by means of a bookbuilding offering to institutional investors. As WACKER had lost control of Siltronic, the segment was deconsolidated as of March 15, 2017. The remaining stake of 30.8 percent in the associate was accounted for using the equity method. In accordance with IFRS 5, the Siltronic segment’s income in Q1 2017 was recognized as income from discontinued operations.

Legal, contractual or regulatory restrictions and protective rights concerning non-controlling interests can limit the Group in its ability to retain access to assets, transfer these to or from other companies unhindered within the Group, or to settle Group debts. The distribution of dividends can be limited by the need to prioritize retirement of shareholder loans. As of the reporting date, there were no significant restrictions due to protective rights to the benefit of non-controlling interests. For more information, please refer to the Equity / Non-Controlling Interests / Capital Structure Management section in these Notes.

In certain countries, regulatory requirements or local corporate-law stipulations can limit the Group’s ability to transfer assets to or from other companies within the Group. Cash and cash equivalents are subject to local foreign-exchange restrictions in some Asian and South American countries. Capital may be exported from such countries only with prior approval from government authorities and by means of capital measures (dividends, capital reductions). There are no other significant limitations on assets’ utility within the Group.