F6. Acquisitions and divestments of Group companies and other operations

On February 27, 2020, it was announced that an agreement had been signed to acquire 75% of the Swedish medical solutions company ABIGO Medical AB. ABIGO Medical AB develops, manufactures and markets products including the Sorbact^® technology, which is a clinically established innovation for advanced wound care. The purchase price for the shares amounts to SEK 674m, and takeover of net debt to SEK 6m. The transaction, which was subject to the customary regulatory approvals, was finalized on April 30, 2020. The purchase price allocation was established in the final quarter of 2020. Goodwill is justified since ABIGO Medical AB was already an important partner and supplier to Essity prior to the acquisition, with Essity already using Sorbact^® in its wound care products to prevent and treat infections. The company has about 170 employees and net sales in 2019 amounted to SEK 403m.

On April 1, 2020, Essity acquired 100% of the shares in Novioscan B.V., a Dutch company that develops a wearable ultrasound technology that monitors the bladder and enables continence control. The purchase price for the shares was EUR 4m and the takeover of net debt was EUR 3m. The company has ten employees. Net sales for 2019 and for the last three quarters of 2020 were negligible in relation to those of the Essity Group. The purchase price allocation indicated goodwill of SEK 71m. The purchase price allocation was established in the final quarter of 2020.

Transaction costs for both acquisitions amounted to SEK 7m and are recognized in items affecting comparability in profit or loss.

Other than a minor acquisition of the associate China-Euro Healthcare Management of SEK 3m, no new acquisitions were carried out. Payments pertaining to earlier acquisitions mainly concern the final settlement of SEK 129m after the acquisition price was finalized for the compulsory redemption of shares in Essity Hygiene Products SE in Germany, former PWA, most of which was recognized as a liability in 2013. In addition to this, earn-out payments of SEK 11m were paid in accordance with the conditions of the purchase agreement from the acquisition of Sensassure in Canada in 2016.

The following table shows the fair value of acquired net assets recognized on the acquisition date, recognized goodwill and the effect on the Group’s cash flow statements.

A purchase price allocation is considered preliminary until it is confirmed. A preliminary purchase price allocation is changed as soon as new information regarding assets/liabilities on the acquisition date is obtained, although the preliminary purchase price allocation must be confirmed not later than one year from the date of the acquisition. The preliminary purchase price allocations for Asaleo, Hydrofera and AquaCast Liner are preliminary and may be changed.

Essity has chosen to deconsolidate its 50% shareholding in ProNARO as of January 1, 2021 and instead recognize the company according to the equity method. Essity has previously recognized ProNARO as a joint operation according to the proportional method. The reason for this change is that ProNARO’s operation, the purpose of which is to supply Essity and its partner Sappi with raw materials at a lower cost by pooling timber purchases, has become more independent as the company now also sells timber to external customers. ProNARO’s recognized net sales for 2020 amounted to SEK 435m and EBITA to SEK 0m in Essity’s accounts.

In conjunction with the process concerning the acquisition of the remaining 25% of the shares in ABIGO Medical AB, in July 2021 Essity – in accordance with the terms of the agreement – divested ABIGO Medical’s pharma operations to the company’s founder Jan G. Smith for SEK 32m. In July 2021, Essity received SEK 18m in payment for previously unpaid purchase consideration from the divestment in 2020 of its 49% stake in Sancella Tunisia, and SEK 8m in payment for the receivable on the sales proceeds concerning the divestment of a minor operation in Medical Solutions in Brazil in 2019.

In 2021, accumulated negative translation differences of a total of SEK 60m were recirculated to profit or loss in conjunction with the revaluation of Essity’s previously recognized holding of 36.2% upon acquisition of Asaleo Care and the concluded liquidation of Essity’s hygiene operation in the Philippines.

The capital gain excluding reclassification of realized translation differences for all divestments amounts to SEK 39m in 2021. Including reclassification of realized negative translation differences totaling SEK 60m for liquidated Group companies and the previous holding of 36.2% in the associate Asaleo Care, the net loss amounts to SEK 21m.

In 2020, Essity divested its share of 49% in Sancella Tunisia, a share of its Baby Care operation in Russia, a minor operation included in the Abigo acquisition, and discontinued its previously closed operation in Morocco and India.

In 2019, Essity divested its holding in the jointly owned company SCA Yildiz in Turkey and a minor operation in Medical Solutions in Brazil.