Form 6-K - Dr. Reddy's

6. Business combinations (continued)
DR. REDDY’S LABORATORIES LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
b. Acquisition of BASF Corporation’s manufacturing facility in Shreveport, Louisiana, USA and related pharmaceutical contract
manufacturing business.
On April 30, 2008, the Company acquired BASF Corporation’s pharmaceutical contract manufacturing business and its manufacturing facility
in Shreveport, Louisiana, U.S.A. for a total cash consideration of Rs.1,639,276 (U.S.$40,466). The business involves contract manufacturing of
generic prescription and over the counter products for branded and generic companies in the United States. This acquired business includes
customer contracts, related ANDAs and NDAs, and trademarks, as well as the Shreveport manufacturing facility. The Company also took over
the existing work force as a part of the acquisition.
The Company has accounted for the acquisition under the purchase method in accordance with IFRS No. 3, “Business Combinations”.
Accordingly, the financial results of the aforesaid acquired business for the period from May 1, 2008 through June 30, 2008 have been included
in the unaudited condensed consolidated interim financial statements of the Company.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.
Recognized values
Particulars on acquisition
Property, plant and equipment Rs. 755,607
Intangible assets 482,068
Inventories 248,198
Net identifiable assets and liabilities Rs. 1,485,873
Goodwill on acquisition 153,403
Consideration paid, satisfied in cash* Rs. 1,639,276
* Total consideration paid includes direct attributable costs of Rs.30, 858 (U.S.$762).
As the acquisition involved purchase of a unit of an existing entity with certain identifiable assets and liabilities, the carrying value of assets
and liabilities before acquisition could not be determined in accordance with IFRS.
The estimated useful lives of intangibles acquired are as follows:
Customer related intangibles 4 - 9 years
Product related intangibles 9-10 years
Goodwill amounts to Rs.153,403 and is attributable mainly to the employee workforce acquired and the estimated values to be derived from the
synergies for the Company due to cost savings. The acquired business contributed revenues of Rs.313,641 and net profit of Rs.2,434 for the
period from May 1, 2008 to June 30, 2008.
c. Acquisition of Jet Generici SRL
On April 30, 2008, the Company acquired Jet Generici Srl, a company engaged in the sale of generic finished dosages in Italy for a total cash
consideration of Rs.147,887 (Euro 2.34 million). The transaction was accounted as an acquisition of business under the purchase method in
accordance with IFRS 3. The transaction resulted in the Company gaining an entry in the Italian market and resulted in goodwill of
Rs.162,356.
d. Pro-forma information
If the above acquisitions had taken effect at the beginning of the reporting period (i.e., April 1, 2007), the revenue, profit before tax and profit
after tax of the Company for the applicable periods on a pro-forma basis would have been as below:
Three months ended
June 30, 2008 June 30, 2007
Revenue Rs.15,182,309 Rs.12,712,666
Profit before tax 1,127,154 1,998,117
Profit after tax 1,072,964 1,644,951
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