[5] Acquisitions

Voltas Material Handling Private Limited

In April 2011, the KION Group and Voltas Limited, Mumbai, India, together established a company to develop, manufacture, sell and service forklift trucks and warehouse trucks. This company, which trades under the name of Voltas Material Handling Private Limited, Mumbai, India ('VMH'), acquired the forklift truck and warehouse technology business of Voltas Limited on 1 May 2011. KION Holding 1 GmbH indirectly holds 66 per cent of the share capital and voting rights in VMH via Linde Material Handling Asia Pacific Pte. Ltd., Singapore.

As a KION Group brand that manufactures in India, Voltas will focus most of its efforts on this market. Its product range includes warehouse trucks, diesel trucks and electric forklift trucks with load capacities of between 1.5 tonnes and 16 tonnes. VMH has a network of 25 branches and authorised dealers throughout India. Since becoming part of the KION Group, VMH has in eight months generated revenue of €22,027 thousand and earned net income of roughly €19 thousand. It is not possible to calculate the revenue and net income that would have been earned if VMH had been acquired at the beginning of the reporting period because no reliable IFRS figures are available for the period prior to April 2011.

A total of 131 Voltas Limited employees were taken on.

The incidental acquisition costs incurred by this business combination amounted to €780 thousand and have been recognised as an expense for the current period and reported as administrative expenses on the face of the consolidated income statement.

Owing to further contractual arrangements, the newly established company has been fully consolidated and, consequently, a liability of €8,920 thousand was recognised at the acquisition date. This estimated fair value also represents the upper limit for the purchase price. This purchase price obligation may decrease consistent with defined key figures. The table below shows the provisional impact of the acquisition of Voltas Limited's forklift truck and warehouse technology business on the consolidated financial statements of KION Holding 1 GmbH.

The gross amounts of the receivables acquired as part of this transaction, which largely constitute trade receivables, totalled €3,164 thousand. At the acquisition date it was estimated that €70 thousand of these trade receivables was irrecoverable. The goodwill arising from the acquisition of VMH is expected to be tax deductible.

Other acquisitions

The dealer Cailotto Carrelli S.p.A., Verona, Italy (100 per cent of the company's share capital and voting rights) was acquired on 4 April 2011.

In addition, by acquiring 100 per cent of the share capital and voting rights in Sterling Mechanical Handling Ltd., Heswall, United Kingdom, the remaining share capital and voting rights (51 per cent) in the dealer Linde Sterling Ltd., Basingstoke, United Kingdom, were acquired effective 15 June 2011.

The carrying amount of the equity investment in Linde Sterling Ltd. immediately prior to the acquisition date was €3,238 thousand. As a result of the remeasurement of the equity investment (49 per cent) on the date of acquisition, €4,102 thousand was recognised in the income statement and reported as profit from equity investments.

Furthermore, the newly established company OOO '’Linde Material Handling Rus'’, Moscow, Russian Federation, acquired the business of the dealer Liftec in Russia on 2 December 2011. The consideration paid included trade receivables in the amount of €5,039 thousand that were offset, a cash payment of €4,903 thousand and contingent consideration with a fair value of €2,879 thousand. This estimated fair value at the acquisition date also represents the upper limit for the purchase price. The contingent consideration may be reduced in line with defined revenue targets for 2012 and 2013 and is payable in 2014 if targets are met.

The incidental acquisition costs incurred by these business combinations total €1,720 thousand and have been recognised as an expense for the current period and reported as administrative expenses in the consolidated income statement.

The table below shows the overall impact of these acquisitions on the consolidated financial statements of KION Holding 1 GmbH based on the provisional figures available at the respective acquisition date.

Revenue increased by €35,720 thousand as a result of the remaining acquisitions. The net loss reported for 2011 contains a loss of approximately €70 thousand for the entities acquired. If these business combinations had been completed by 1 January 2011, this would have had no material impact on either the revenue or the net loss reported by the KION Group.

The purchase price allocations for the acquisitions described above were only provisional as at 31 December 2011 because some details had not yet been fully evaluated. Goodwill represents the strategic, technological and geographical synergies that the KION Group is able to derive from the business combinations. None of the goodwill arising from the other acquisitions is currently tax deductible.