- Financial Statements
Notes to the Consolidated Financial Statements
for the year to 31 December 2007
35. Merger with George Wimpey Plc
On 3 July 2007, Taylor Woodrow plc and George Wimpey Plc merged their operations. Taylor Woodrow plc (subsequently renamed Taylor Wimpey plc) acquired 100% of the share capital of George Wimpey Plc for a total consideration of £2,093.9m. George Wimpey Plc is the parent company of a group of companies involved in housebuilding in the UK and USA. This transaction has been accounted for using the purchase method of accounting. The book values, fair value adjustments and provisional fair values are set out in the table below.
| Book value £m |
Fair value adjustments £m |
Provisional fair value £m |
|
| Goodwill | 5.4 | (5.4) | – |
| Brand values | – | 140.0 | 140.0 |
| Other intangible assets | 20.0 | (4.2) | 15.8 |
| Property, plant and equipment | 16.1 | 0.3 | 16.4 |
| Joint ventures | 28.7 | – | 28.7 |
| Deferred tax (net) | 70.3 | 22.1 | 92.4 |
| Inventories | 3,208.6 | (188.1) | 3,020.5 |
| Trade and other receivables | 120.8 | – | 120.8 |
| Current tax (net) | (102.0) | – | (102.0) |
| Derivative financial instruments (net) | 6.9 | – | 6.9 |
| Cash and cash equivalents | 43.9 | – | 43.9 |
| Financial liabilities | (569.8) | 1.1 | (568.7) |
| Trade and other payables | (917.1) | 2.6 | (914.5) |
| Deficit on defined benefit pension schemes | (123.3) | – | (123.3) |
| Provisions | (19.7) | – | (19.7) |
| 1,788.8 | (31.6) | 1,757.2 | |
| Goodwill | 336.7 | ||
| 2,093.9 | |||
| Satisfied by:– | |||
| Issue of Taylor Woodrow plc shares | |||
| – issued | 2,075.2 | ||
| – to be issued | 2.9 | ||
| Directly attributable costs | 15.8 | ||
| 2,093.9 | |||
| Net cash inflow arising on acquisition | |||
| Cash and cash equivalents | 43.9 | ||
| Directly attributable costs | (15.8) | ||
| 28.1 |
Taylor Woodrow plc issued 563,919,759 shares of 25p nominal value to shareholders of George Wimpey Plc. The fair value of the shares issued was £2,075.2m, which was determined using the opening mid-market price of Taylor Woodrow plc on 3 July 2007. In addition, at 3 July 2007, the company has a liability to issue shares with a fair value using the Monte Carlo method of £2.9m for the period up to 3 July to satisfy the remaining George Wimpey share option holders. The number of shares issuable under share options is 12,463,543. The directly attributable costs relate chiefly to legal and banking costs.
The most significant fair value adjustments comprise:
- £140.0m related to the valuation of the George Wimpey, Laing Homes and Morrison Homes brands. The valuations were £110m, £10m and £20m respectively. See note 5.
- A £188.1m reduction in inventories to reflect the fair value of land and work in progress. Of this amount, £154.2m relates to the US and £33.9m to the UK.
- The adjustment to deferred tax mainly relates to the brand values and adjustments to inventory referred to above.
The total provisional goodwill arising is £336.7m and reflects anticipated synergy benefits from the merger. This includes build cost efficiencies, rationalisation of operating divisions, greater operational flexibility from a larger landbank, elimination of duplication in head office functions, an expanded portfolio of strategic land and benefits from merging the skills and experience of the Taylor Woodrow and George Wimpey workforce.
George Wimpey Plc contributed £1,647m of revenue and £65m (after charging restructuring costs of £15m and brand impairments of £30m) to the Group’s profit before tax for the period between the date of acquisition and the balance sheet date.
It is not practicable to restate George Wimpey’s results to 3 July because of the impact of fair value adjustments. However, if the acquisition of George Wimpey Plc had been completed on the first day of the financial year Group revenue for the period on a pro forma basis would have been £5,887.5m and Group profit on ordinary activities before taxation and exceptional items on a pro forma basis, would have been £535.6m. The pro forma basis combines George Wimpey Plc’s adjusted interim results and the full year results of Taylor Wimpey plc.
The operating review gives details of how the Taylor Woodrow and George Wimpey businesses have been combined together following the merger, including details of certain regional offices which have been closed.