Note 30. Acquisition and divestment of operations, discontinued operations and assets held for sale

The acquisitions and divestments of business combinations executed in 2018 and 2017 are set out below. Annual revenue and number of employees reflect the situation at the date of the respective transaction.

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Business area	Company	Acquisition date	Annual revenue	No. of employees
Sandvik Mining and Rock Technlology	Inrock	2 July 2018	46 MUSD in 2017	70
Sandvik Machining Solutions	Metrologic group	4 July 2018	43 MEUR in 2017	170
Sandvik Materials Technology	Custom Electric Manufacturing	1 August 2018	5 MUSD in 2017	20
Sandvik Machining Solutions	Dura-Mill	3 December 2018	7 MUSD in 2017	30

There were no acquisitions carried out during 2017.

Total fair value of assets and liabilities of acquired businesses in 2018

The fair value of acquired assets and assessed liabilities has been preliminary established for the acquisitions of Metrologic, Inrock and Dura-Mill due to the ongoing analysis of the acquired surplus values. Only minor IFRS adjustments were made to the acquisition values.

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Fair value recognized in the Group	Metrologic	Inrock	Other	Total
Intangible assets	1,463	—	51	1,514
Property, plant and equipment	29	84	1	114
Inventories	7	65	8	80
Current receivables	282	172	5	459
Cash and cash equivalents	314	—	—	314
Provisions	–10	—	—	–10
Interest-bearing liabilities	–2	–5	—	–7
Non-interest-bearing liabilities	–2,147	–325	–3	–2,475
Net identifiable assets and liabilities	–64	–9	62	–11
Surplus values	1,966	681	146	2,793
Purchase consideration	–1,902	–672	–208	–2,782
Cash and cash equivalents in acquired businesses	314	—	—	314
Repayment of loans	–1,924	–171	—	–2,095
Transaction expenses	–68	0	—	–68
Net cash outflow	–3,580	–843	–208	–4,631

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Contributions from companies acquired in 2018 by business area
	Sandvik Machining Solutions	Sandvik Mining and Rock Technology	Sandvik Materials Technology	Total
Contributions as of acquisition date
Revenue	238	163	19	420
Profit/loss for the year	93	25	3	121

Contributions if the acquisition date would have been 1 January 2018
Revenue	451	313	42	806
Profit/loss for the year	184	34	9	227

Discontinued operations

The Mining Systems business was divested to FLSmidth and NEPEAN during 2017. Consequently, order intake and revenues in the quarter relate to small bookings of parts and service to already ongoing projects. The operating loss amounted to –262 million SEK (–95), adversely impacted by primarily high costs in completion of the remaining ongoing projects. Change in currency rates has adversively impacted the finance net by –3 million SEK.

Mining Systems has been reported as discontinued operations and the divested businesses has as of 2 November 2017 been deconsolidated from Sandvik’s financial statements. The projects to be finalized during 2019 by Sandvik, through an operational agreement with FLSmidth, will be reported as discontinued operations.

Assets held for sale

On 17 May 2017, Sandvik announced Sandvik Materials Technology’s intention to divest its welding and stainless wire operations. These businesses are subject to intense competition and Sandvik Materials Technology does not hold a leading market position. In connection with the ongoing divestment, an impairment of fixed assets, amounting to 450 million SEK was exercised in 2017.

These businesses were reported as assets held for sale in Sandvik consolidated financial statements as from the second quarter of 2017 and until the second quarter of 2018 when the businesses were divested.

On 8 December 2017, Sandvik announced that it has signed an agreement to divest Hyperion to the US listed investment firm KKR. Hyperion was a separate product area within Other Operations, offering products and solutions based on hard and super-hard materials. The Hyperion business was divested in the third quarter of 2018.

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Income statement for discontinued operations
	2017	2018
Revenue	3,080	852
Cost of sales and services	–2,851	–1,174
Gross profit	229	–322
Selling expenses	–102	–42
Administrative expenses	–210	–110
Research and development costs	–15	–6
Other operating income	49	12
Other operating expenses	–12	–84
Operating loss	–61	–552
Financial income	9	7
Financial expenses	—	—
Net financing costs	9	7
Loss after financial items	–52	–545
Income tax	—	—
Loss for the year	–52	–545

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Assets and liabilities included in divestments
	Other Operations	SMT	Total
Intangible assets	1,077	6	1,083
Property, plant and equipment	897	109	1,006
Financial assets	—	200	200
Deferred tax assets	31	—	31
Inventories	961	228	1,189
Current receivables	780	81	861
Cash and cash equivalents	80	10	90
Provisions	–6	–1	–7
Interest-bearing liabilities	–453	–180	–633
Non-interest-bearing liabilities	–884	–48	–932

Gain on divestments of business combinations			879

Consideration received after divestment costs			3,769
Loan repayment			373
Less: Cash and cash equivalents in the divested entities			–90
Impact on the Group’s cash and cash equivalents, divested operations			4,052

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Assets and liabilities held for sale
	2017	2018
Intangible assets	1,016	—
Property, plant and equipment	823	26
Financial assets	79	4
Current assets	2,604	611
Total assets	4,522	641
Provisions	438	4
Interest-bearing liabilities	9	—
Non-interest-bearing liabilities	1,123	608
Total liabilities	1,570	612

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Cash flow statement for discontinued operations
	2017	2018
Cash flow from operating activities	–466	–439
Cash flow from investing activities	–144	2
Cash flow from financing activities	2	–2
Cash flow from discontinued activities	–608	–439

Divestments

In July 2018, Sandvik divested the Hyperion business, within Other operations, to the US-listed investment firm KKR at the price of 4 billion SEK on a debt- and cash-free basis. In 2017 the business recorded revenues of about 3.2 billion SEK with approximately 1,400 employees.

During 2018, Sandvik Materials Technology divested its holding in the associated company Fagersta stainless and the businesses within Stainless and Welding Wire. The considerations amounted to 475 million SEK during 2018. The transactions involved some 260 employees.