Notes on the IFRS basis results
K. Acquisitions and disposals
(i) Shareholder acquisitions and disposals – Egg
In the first half of 2006, the Company acquired the outstanding 21.7 per cent minority interest in Egg, its UK banking business. The Company accounted for the purchase of minority interests using the economic entity method. Accordingly, £167 million was charged to retained earnings in 2006 representing the difference between the consideration paid and the share of net assets acquired.
On 29 January 2007, the Company announced that it had entered into a binding agreement to sell Egg Banking plc to Citi. Under the terms of the agreement, the consideration payable to the Company by Citi was £575 million cash, subject to adjustments to reflect any change in net asset value between 31 December 2006 and completion.
On 1 May 2007, the Company completed the sale. The consideration, net of expenses, was £527 million. The reduction from the £575 million noted above primarily reflects Egg’s post tax operating loss of £49 million for the period from 1 January 2007 to the date of sale, as shown in note M.
Cash and cash equivalents disposed of were £1,065 million. Accordingly, the cash outflow for the Group arising from the disposal of Egg, as shown in the summary consolidated cash flow statement, was £538 million.
(ii) PAC with-profits fund acquisitions
The PAC with-profits fund acquires a number of venture capital holdings through PPM Capital and M&G in which the Group is deemed
to have a controlling interest, in aggregate with, if applicable, other holdings held by, for example, the Prudential Staff Pension Scheme.
There were two such acquisitions during the period to 30 June 2007. These were acquisitions for:
- 78 per cent of the voting equity interest of Red Funnel, a ferry company, in June 2007; and
- 71 per cent of the voting equity interest of Orizon AG, an employment hiring agency, in March 2007.
The results of the acquisitions have been included in the consolidated financial statements of the Group commencing on the respective dates of acquisition. The earnings contributed by these acquisitions to the income statement are insignificant to the half year 2007 results and are reflected in the change in the unallocated surplus of the with-profits fund. Shareholder results are unaffected. Total consideration of £97 million was paid in respect of the acquisitions during the period to 30 June 2007. Cash and cash equivalents of £20 million were acquired.
(iii) PAC with-profits fund disposals
As at 31 December 2006, one venture subsidiary was classified as held for sale; Pharmacia Diagnostics. The sale of this venture subsidiary was completed on 18 January 2007. Total cash consideration received was £179 million. Goodwill of £138 million and cash and cash equivalents of £22 million were disposed of. No other venture subsidiaries were sold during the first half of 2007 or classified as held for sale at 30 June 2007.
