Note 13:Acquisition and disposal of subsidiaries

13.1 Acquisition of subsidiaries	September 2016 RM
September 2016
Relational Database Consulting (Pty) Ltd (RDC)
On 1 April 2016, Business Connexion Group Limited acquired the entire share capital of RDC.
The total purchase consideration amounted to R30 million, funded by a cash payment of R16 million and a deferred purchase consideration of R14 million, payable on achieving financial targets.
RDC is a market leader in Database and Operating System administration with a strong focus on Oracle.
The merger will enable the Group to expand its existing offerings while, at the same time, providing scale in IT services, which will help reinforce the Group's core connectivity business and enhance convergence strategy. Their expanded range of services includes Oracle E-Business Suit, Oracle Fusion Middleware, Oracle Solaris Support and Oracle Sales.
The acquisition has been accounted for using the acquisition method. The date of acquisition is 1 April 2016 and the interim financial statements include the RDC results for the 6 months ended 30 September 2016.
The fair value of the identifiable assets and liabilities at acquisition date were determined as follows:
Assets
Trade and other receivables	5
Cash and cash equivalents	17
Total assets	22
Liabilities
Non current debt	(3)
Trade and other payables	(13)
Total liabilities	(16)
Total identifiable net assets at fair value	6
Goodwill arising at acquisition	24
Cash paid	16
Deferred purchase consideration	14
Purchase consideration transferred	30
Net cash inflow acquired with the subsidiary	1

At the date of the acquisition, the fair value of the trade receivables of R5 million approximated its carrying value.

From the date of acquisition, RDC has contributed R51 million of revenue and R9 million net profit before tax from the continuing operations of the Group.

The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of RDC with those of the Group. The goodwill is not deductible for income tax purposes.

Transaction costs of R1 million, which includes issue costs, have been expensed since the inception of the acquisition. These expenses were recognised in service fees.

As at 30 September 2016, the RDC and BCX initial business combination was complete.

March 2016
Business Connexion Group Limited (BCX)

On 25 August 2015, Telkom acquired the entire issued ordinary share capital and the entire issued "A "ordinary shares of Business Connexion Group (BCX). The total purchase consideration of R2.7 billion was funded through Telkom’s own cash resources.

BCX provides innovative business solutions based on information and communication technology and runs ICT systems and manages products, services and solutions for a wide range of customers.

Anco IT (Pty) Ltd (Anco)

On 1 November 2015 BCX acquired the entire issued ordinary share capital of Anco. The total purchase consideration of R41 million was in the form of cash, earn-out payments, a loan to BCX and deferred consideration.

Anco provides innovative business solutions based on information and communication technology and runs ICT systems and manages products, services and solutions for a wide range of customers.

UCS Solutions (Pty) Ltd (UCS) minority interest

On 31 December 2015 the Telkom Group, through BCX acquired the remaining 15% of the UCS Solution Proprietary Limited (and its holding in Integr8 IT Proprietary Limited), based on the vested put option agreement with shareholders. UCS and Integr8 are now a wholly owned subsidiary of BCX group. This transaction was accounted for as an equity transaction.

Common Control transactions

On 1 November 2015 Cybernest (DCO), previously the IT business division of Telkom was sold to BCX to realise synergies. The transaction was financed through a loan from Telkom to BCX and accounted for as common control transaction. BCX recognised the acquired DCO assets at their carrying amount on the date of sale and the difference between the proceeds and the carrying amount of the DCO business was recognised as common control equity reserves. In Telkom company the difference between the carrying amount of the DCO business and proceeds was recognised in profit or loss.