2019Statements

3 Change in the scope of the consolidation

Acquisitions

In 2019, DSM acquired businesses for a total consideration of €585 million.

On 14 March 2019, DSM Hydrocolloids purchased an additional 46.05% stake in Andre Pectin (Yantai, China) for a cash consideration of €159 million, leading to a total shareholding of 75% and full control in Andre Pectin. The remaining 25% of the shares in Andre Pectin continues to be held by the Shandong Andre Group Co., Ltd., which supplies raw materials and utilities. Based on the contractual agreement in the Sales and purchase agreement, the company was consolidated as of 1 January 2019. In accordance with IFRS 3, the purchase price was allocated to identifiable assets and liabilities acquired, resulting in a goodwill amount of €134 million. The acquisition of Andre Pectin contributed €58 million to net sales and €25 million to Adjusted EBITDA in 2019.

On 31 July 2019, DSM Engineering Plastics acquired the specialty materials business of SRF Ltd. (Pantnagar, India) for a cash consideration of €41 million. The acquisition will further cement DSM Materials' position in India as the leading player in, among other industrial sectors, engineering plastics in this fast-growing economy, and fits with its strategic aim of generating leading positions in fast-growing economies. In accordance with IFRS 3, the purchase price was allocated to identifiable assets and liabilities acquired, resulting in a goodwill amount of €13 million. The acquisition of SRF's specialty materials business contributed €10 million to net sales and €1 million to Adjusted EBITDA in 2019. If the acquisition had occurred on 1 January 2019, the contribution to net sales would have been approximately €27 million and Adjusted EBITDA €3 million.

On 27 August 2019, DSM Nutritional Products acquired the vitamin E business of Nenter & Co., Inc., with Nenter keeping a 25% non-controlling interest, via a newly created company, Yimante Health Ingredients (Jingzhou) Company Ltd. By this transaction, DSM acquired all Nenter's Jingzhou vitamin E production and related assets and now owns and will operate the vitamin E production facilities in Jingzhou (Hubei Province, China). Yimante has a minority shareholding of 33% in Nenter's Shishou facility (Hubei Province, China), where an intermediate for vitamin E is produced. The company will produce vitamin E exclusively for DSM. DSM immediately started implementing the anticipated upgrading and refurbishment activities to secure a high-quality and sustainable supply of vitamin E that complies with DSM's safety, health and environmental standards, and therefore stopped production. In accordance with IFRS 3, the purchase price amounting to €139 million was provisionally allocated to identifiable assets and liabilities acquired, pending completion of an independent valuation process. Due to the shutdown as from the transaction date, the acquisition of Nenter's vitamin E business did not contribute to net sales and Adjusted EBITDA in 2019.

On 27 December 2019, DSM Food Specialties acquired a 100% interest in specialty dairy solutions provider Koninklijke CSK Food Enrichment C.V. (Royal CSK) (Wageningen, Netherlands) for a cash consideration of €160 million. With the acquisition of Royal CSK, DSM will further strengthen its product portfolio and application know-how and expertise in food & beverage. In accordance with IFRS 3, the purchase price was provisionally allocated to identifiable assets and liabilities acquired, pending completion of an independent valuation process. The acquisition did not yet contribute to net sales and Adjusted EBITDA in 2019. If the acquisition had occurred on 1 January 2019, additional net sales would have been approximately €65 million and Adjusted EBITDA €11 million.

Together, the acquisitions in 2019 contributed €68 million to net sales and €26 million to Adjusted EBITDA. If all acquisitions had occurred on 1 January 2019, additional net sales would have been approximately €150 million and Adjusted EBITDA €39 million.

The goodwill recognized for these acquisitions is in general not deductible for corporate income tax with the exception of SRF.

The main impact of a Purchase Price Allocation is the recognition of intangible assets. The valuation techniques DSM used for measuring the fair value of these intangible assets were as follows:

• Technology: was valued by applying the relief-from-royalty method, an income approach whereby the value of an asset is estimated by capitalizing the royalties saved as a result of owning the asset; and by applying the multi-period excess earnings method (MEEM) considering the present value of net cash flows expected to be generated by the customer relationships

• Customer relationships: the fair values were determined by applying the MEEM and via the cost approach based on historic market and sales expenses of the business

• Supplier relationships: were valued using the discounted cash flow (DCF) method, based on discounting the cash flows that can be attributed to the supplier relationships and after taking into account the contribution of other assets to the cash flow of these intangible assets

The impact of the acquisitions on DSM's consolidated balance sheet (measured at the date of acquisition) is shown in the following table.