SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2015
INTERNET GOLD-GOLDEN LINES LTD.
(Name of Registrant)
2 Dov Friedman Street, Ramat Gan 5250301, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __________
Internet Gold-Golden Lines Ltd.
EXPLANATORY NOTE
The Following Exhibits were attached to Bezeq - The Israel Telecommunication Corp. Ltd., or Bezeq, (a controlled subsidiary of B Communications Ltd., itself a subsidiary of Internet Gold) report for the convening of a special general meeting for the approval of the Bezeq's engagement in a transaction that increases Bezeq's holding to 100% of the shares of DBS Satellite Services (1998) Ltd. ("Yes Transaction"), and as were filed with the Israel Securities Authority and the Tel Aviv Stock Exchange:
|
99.1
|
Proforma financial statements of Bezeq (assuming the Merger Terms are accepted and the option is exercised, as such terms were defined in Bezeq's report for the convening the general meeting).
|
|
99.2
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Proforma financial statements of Bezeq (assuming acquisition of 100% of Yes shares).
|
The above items constitute a translation of the Proforma financial statements published by the Bezeq. The Hebrew version was submitted by Bezeq to the relevant authorities pursuant to Israeli law, and represents the only binding and full version and the only one having legal effect. This translation was prepared for convenience purposes only. The link for the full report is: http://maya.tase.co.il/bursa/report.asp?report_cd=949135.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
INTERNET GOLD-GOLDEN LINES LTD.
|
|
| |
|
(Registrant)
|
|
| |
|
|
|
| |
By: |
/s/ Doron Turgeman
|
|
| |
|
Doron Turgeman
|
|
| |
|
Chief Executive Officer
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|
Date: February 19, 2015
EXHIBIT INDEX
The Following Exhibits were attached to Bezeq - The Israel Telecommunication Corp. Ltd., or Bezeq, (a controlled subsidiary of B Communications Ltd., itself a subsidiary of Internet Gold) report for the convening of a special general meeting for the approval of the Bezeq's engagement in a transaction that increases Bezeq's holding to 100% of the shares of DBS Satellite Services (1998) Ltd. ("Yes Transaction"), and as were filed with the Israel Securities Authority and the Tel Aviv Stock Exchange:
|
99.1
|
Proforma financial statements of Bezeq (assuming the Merger Terms are accepted and the option is exercised, as such terms were defined in Bezeq's report for the convening the general meeting).
|
|
99.2
|
Proforma financial statements of Bezeq (assuming acquisition of 100% of Yes shares).
|
The above items constitute a translation of the Proforma financial statements published by the Bezeq. The Hebrew version was submitted by Bezeq to the relevant authorities pursuant to Israeli law, and represents the only binding and full version and the only one having legal effect. This translation was prepared for convenience purposes only. The link for the full report is: http://maya.tase.co.il/bursa/report.asp?report_cd=949135.
Exhibit 99.1
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Bezeq The Israel Telecommunication Corporation Limited
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Consolidated Pro Forma Financial Statements
|
Increase to a holding of 58% in DBS
Satellite Services (1998) Ltd.
| |
Somekh Chaikin |
Telephone |
972 2 531 2000 |
| |
8 Hartum Street, |
Fax |
972 2 531 2044 |
| |
PO Box 212, Jerusalem 91001 |
Internet |
www.kpmg.co.il |
"Bezeq" the Israeli Telecommunication Corporation Ltd.
We have audited the accompanying pro forma consolidated balance sheet of “Bezeq" the Israeli Telecommunication Corporation Ltd. (hereinafter “the Company”) as of December 31, 2013 and the pro forma consolidated income statements and statements of comprehensive income for each of the three years in the period ended December 31, 2013. These pro forma financial statements are the responsibility of the Company's Board of Directors and of its Management. Our responsibility is to express an opinion on these pro forma financial statements based on our audit.
We did not audit the financial statements of certain consolidated subsidiaries whose assets constitute 1.6% of the total consolidated assets as of December 31, 2013, and whose revenues constitute 1.3%, 1.6 % and 1.5 % of the total consolidated revenues for the years ended December 31, 2013, 2012 and 2011, respectively. The financial statements of those companies were audited by other auditors whose reports thereon were furnished to us, and our opinion, insofar as it relates to amounts emanating from the financial statements of such companies, is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards in Israel, including standards prescribed by the Auditors Regulations (Manner of Auditor's Performance) - 1973. Such standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors and by Management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the pro forma consolidated financial statements referred to above present fairly, in all material respects, the pro forma consolidated financial position of the Company and its consolidated subsidiaries as of December 31, 2013 and their pro forma results of operations for each of the three years in the period ended December 31, 2013, in accordance with Regulation 9a of the Securities Regulations (Periodic and Immediate Reports), 1970, based on the assumptions set forth in Note 3
Somekh Chaikin
Certified Public Accountants (Isr.)
February 15, 2015
| |
|
December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
610 |
|
|
|
126 |
|
|
|
736 |
|
|
Investments, including derivatives
|
|
|
1,132 |
|
|
|
- |
|
|
|
1,132 |
|
|
Trade receivables
|
|
|
2,651 |
|
|
|
118 |
|
|
|
2,769 |
|
|
Other receivables
|
|
|
344 |
|
|
|
2 |
|
|
|
346 |
|
|
Inventory
|
|
|
117 |
|
|
|
- |
|
|
|
117 |
|
|
Assets classified as held for sale
|
|
|
66 |
|
|
|
- |
|
|
|
66 |
|
|
Total current assets
|
|
|
4,920 |
|
|
|
246 |
|
|
|
5,166 |
|
|
Trade and other receivables
|
|
|
652 |
|
|
|
- |
|
|
|
652 |
|
|
Broadcasting rights, net of rights exercised
|
|
|
- |
|
|
|
417 |
|
|
|
417 |
|
|
Property, plant and equipment
|
|
|
5,973 |
|
|
|
775 |
|
|
|
6,748 |
|
|
Intangible assets
|
|
|
2,060 |
|
|
|
2,162 |
|
|
|
4,222 |
|
|
Deferred and other expenses
|
|
|
261 |
|
|
|
36 |
|
|
|
297 |
|
|
Investments in equity-accounted investees (mainly loans)
|
|
|
1,015 |
|
|
|
(979 |
) |
|
|
36 |
|
|
Investments
|
|
|
81 |
|
|
|
- |
|
|
|
81 |
|
|
Deferred tax assets
|
|
|
60 |
|
|
|
- |
|
|
|
60 |
|
|
Total non-current assets
|
|
|
10,102 |
|
|
|
2,411 |
|
|
|
12,513 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
15,022 |
|
|
|
2,657 |
|
|
|
17,679 |
|
Consolidated Pro Forma Financial Statements as at December 31, 2013
Pro Forma Consolidated Statement of Financial Position as at
|
| |
|
December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
Debentures, loans and borrowings
|
|
|
1,136 |
|
|
|
328 |
|
|
|
1,464 |
|
|
Trade payables
|
|
|
719 |
|
|
|
422 |
|
|
|
1,141 |
|
|
Other payables, including derivatives
|
|
|
707 |
|
|
|
150 |
|
|
|
857 |
|
|
Current tax liabilities
|
|
|
523 |
|
|
|
- |
|
|
|
523 |
|
|
Provisions
|
|
|
125 |
|
|
|
13 |
|
|
|
138 |
|
|
Employee benefits
|
|
|
257 |
|
|
|
10 |
|
|
|
267 |
|
|
Total current liabilities
|
|
|
3,467 |
|
|
|
923 |
|
|
|
4,390 |
|
|
Loans and debentures
|
|
|
8,691 |
|
|
|
1,568 |
|
|
|
10,259 |
|
|
Minority interest loans in DBS
|
|
|
- |
|
|
|
187 |
|
|
|
187 |
|
|
Employee benefits
|
|
|
234 |
|
|
|
6 |
|
|
|
240 |
|
|
Provisions
|
|
|
68 |
|
|
|
- |
|
|
|
68 |
|
|
Deferred tax liabilities
|
|
|
55 |
|
|
|
- |
|
|
|
55 |
|
|
Other liabilities, including derivatives
|
|
|
84 |
|
|
|
25 |
|
|
|
109 |
|
|
Total non-current liabilities
|
|
|
9,132 |
|
|
|
1,786 |
|
|
|
10,918 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,599 |
|
|
|
2,709 |
|
|
|
15,308 |
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributed to owners of the Company
|
|
|
2,423 |
|
|
|
120 |
|
|
|
2,543 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(172 |
) |
|
|
(172 |
) |
|
Total equity
|
|
|
2,423 |
|
|
|
(52 |
) |
|
|
2,371 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
15,022 |
|
|
|
2,657 |
|
|
|
17,679 |
|
| |
|
|
|
|
|
Yitzhak Edelman, outside director
|
|
Stella Handler
|
|
David (Dudu) Mizrahi
|
|
director (Authorized to sign as chairman of the board)
|
|
CEO
|
|
Deputy CEO and CFO
|
|
chairman of the board, see Note 2 below)
|
|
|
|
|
Date of approval of the pro forma financial statements:
The attached notes are an integral part of these pro forma consolidated financial statements
Pro Forma Consolidated Financial Statements as at December 31, 2013
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the pro forma event
|
|
|
Adjustments for pro forma data
|
|
|
Pro forma data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,563 |
|
|
|
1,624 |
|
|
|
11,187 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,311 |
|
|
|
404 |
|
|
|
1,715 |
|
|
Salaries
|
|
|
1,872 |
|
|
|
253 |
|
|
|
2,125 |
|
|
General and operating expenses
|
|
|
3,576 |
|
|
|
841 |
|
|
|
4,417 |
|
|
Other operating expenses (income), net
|
|
|
(15 |
) |
|
|
- |
|
|
|
(15 |
) |
| |
|
|
6,744 |
|
|
|
1,498 |
|
|
|
8,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,819 |
|
|
|
126 |
|
|
|
2,945 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
573 |
|
|
|
178 |
|
|
|
751 |
|
|
Financing income
|
|
|
(428 |
) |
|
|
219 |
|
|
|
(209 |
) |
|
Financing expenses, net
|
|
|
145 |
|
|
|
397 |
|
|
|
542 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,674 |
|
|
|
(271 |
) |
|
|
2,403 |
|
|
Share in losses of equity-accounted investees
|
|
|
252 |
|
|
|
(250 |
) |
|
|
2 |
|
|
Profit before income tax
|
|
|
2,422 |
|
|
|
(21 |
) |
|
|
2,401 |
|
|
Income tax
|
|
|
651 |
|
|
|
(5 |
) |
|
|
646 |
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
1,771 |
|
|
|
93 |
|
|
|
1,864 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(109 |
) |
|
|
(109 |
) |
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.68 |
|
|
Pro Forma Consolidated Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(16 |
) |
|
|
- |
|
|
|
(16 |
) |
|
Total comprehensive income for the year
|
|
|
1,777 |
|
|
|
(16 |
) |
|
|
1,761 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2012
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
10,278 |
|
|
|
1,614 |
|
|
|
11,892 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,436 |
|
|
|
428 |
|
|
|
1,864 |
|
|
Salaries
|
|
|
1,976 |
|
|
|
244 |
|
|
|
2,220 |
|
|
General and operating expenses
|
|
|
3,953 |
|
|
|
869 |
|
|
|
4,822 |
|
|
Other operating expenses (income), net
|
|
|
(128 |
) |
|
|
- |
|
|
|
(128 |
) |
| |
|
|
7,237 |
|
|
|
1,541 |
|
|
|
8,778 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3,041 |
|
|
|
73 |
|
|
|
3,114 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
649 |
|
|
|
156 |
|
|
|
805 |
|
|
Financing income
|
|
|
(498 |
) |
|
|
192 |
|
|
|
(306 |
) |
|
Financing expenses, net
|
|
|
151 |
|
|
|
348 |
|
|
|
499 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,890 |
|
|
|
(275 |
) |
|
|
2,615 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
245 |
|
|
|
(248 |
) |
|
|
(3 |
) |
|
Profit before income tax
|
|
|
2,645 |
|
|
|
(27 |
) |
|
|
2,618 |
|
|
Income tax
|
|
|
778 |
|
|
|
(5 |
) |
|
|
773 |
|
|
Profit for the year
|
|
|
1,867 |
|
|
|
(22 |
) |
|
|
1,845 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
1,861 |
|
|
|
88 |
|
|
|
1,949 |
|
|
Non-controlling interests
|
|
|
6 |
|
|
|
(110 |
) |
|
|
(104 |
) |
|
Profit for the year
|
|
|
1,867 |
|
|
|
(22 |
) |
|
|
1,845 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.68 |
|
|
|
|
|
|
|
0.72 |
|
|
Pro Forma Consolidated Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2012
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
1,867 |
|
|
|
(22 |
) |
|
|
1,845 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
(20 |
) |
|
|
- |
|
|
|
(20 |
) |
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(7 |
) |
|
|
- |
|
|
|
(7 |
) |
|
Total comprehensive income for the year
|
|
|
1,840 |
|
|
|
(22 |
) |
|
|
1,818 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2011
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
11,373 |
|
|
|
1,603 |
|
|
|
12,976 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,395 |
|
|
|
456 |
|
|
|
1,851 |
|
|
Salaries
|
|
|
2,090 |
|
|
|
233 |
|
|
|
2,323 |
|
|
General and operating expenses
|
|
|
4,494 |
|
|
|
800 |
|
|
|
5,294 |
|
|
Other operating expenses (income), net
|
|
|
139 |
|
|
|
(16 |
) |
|
|
123 |
|
| |
|
|
8,118 |
|
|
|
1,473 |
|
|
|
9,591 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3,255 |
|
|
|
130 |
|
|
|
3,385 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
601 |
|
|
|
169 |
|
|
|
770 |
|
|
Financing income
|
|
|
(389 |
) |
|
|
165 |
|
|
|
(224 |
) |
|
Financing expenses, net
|
|
|
212 |
|
|
|
334 |
|
|
|
546 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
3,043 |
|
|
|
(204 |
) |
|
|
2,839 |
|
|
Share in losses of equity-accounted investees
|
|
|
216 |
|
|
|
(217 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
2,827 |
|
|
|
13 |
|
|
|
2,840 |
|
|
Income tax
|
|
|
758 |
|
|
|
4 |
|
|
|
762 |
|
|
Profit for the year
|
|
|
2,069 |
|
|
|
9 |
|
|
|
2,078 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
2,074 |
|
|
|
93 |
|
|
|
2,167 |
|
|
Non-controlling interests
|
|
|
(5 |
) |
|
|
(84 |
) |
|
|
(89 |
) |
|
Profit for the year
|
|
|
2,069 |
|
|
|
9 |
|
|
|
2,078 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.77 |
|
|
|
|
|
|
|
0.80 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.76 |
|
|
|
|
|
|
|
0.80 |
|
|
Interim Condensed Consolidated Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2011
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
2,069 |
|
|
|
9 |
|
|
|
2,078 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
27 |
|
|
|
- |
|
|
|
27 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
|
Total comprehensive income for the year
|
|
|
2,104 |
|
|
|
9 |
|
|
|
2,113 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Notes to the Pro Forma Consolidated Financial Statements
|
These pro forma consolidated financial statements are prepared in accordance with Regulation 9A of the Securities Regulations (Periodic and Immediate Reports), 1970 and refer to the acquisition of control in DBS Satellite Services (1998) Ltd. (“DBS”) by way of the exercise of an option for DBS shares by the company granted to it, at no cost, at a rate of 8.6% of the issued capital of DBS, as a result of which the Company’s holdings in DBS will reach 58%.
|
2.
|
The board of directors authorized external director Yitzhak Edelman, chairman of the committee for reviewing financial statements, to sign these pro forma consolidated financial statements instead of the chairman of the board, in accordance with Regulation 9(E) of the Securities Regulations (Periodic and Immediate Reports), 1970. These reports are an attachment to the reports published by the Company, inter alia, in accordance with the Securities Regulations (Transaction between the Company and its Controlling Shareholder), 2001, regarding the Company's engagement in the transaction for acquisition of the holdings of Eurocom DBS Ltd. ("Eurocom DBS") in DBS. The chairman of the board did not attend the board meeting for approval of these financial statements, for the sake of caution, being a controlling shareholder (indirectly) in Eurocom DBS. The other directors in the Company, who are relatives of the chairman of the board and/or officers of Eurocom Group, did not attend this meeting.
|
|
3.
|
The pro forma event and assumptions
|
Under the acquisition transaction described below, Company plans to engage in a transaction with a controlling shareholder in a company in which he has a personal interest, meaning, the Company will gain control of 100% of the holdings in DBS Satellite Services (1998) Ltd. (“DBS”). Following the transaction, if approved, DBS will become a wholly-owned subsidiary of the Company.
On February 10, 2015, the special subcommittee of the board of directors, audit committee and the board of directors of the Company approved a transaction between the Company and Eurocom DBS, which is a company controlled (indirectly) by Shaul and Yosef Elovitch, who are controlling shareholders of the Company. Under the transaction, if approved, the Company will acquire the entire holding of Eurocom DBS in DBS, which, as at this date, represents 50.22% of the issued share capital of DBS (41.62% fully diluted) and all of the owners loans provided by Eurocom to DBS ("the Acquisition Transaction"). Prior to the Acquisition Transaction, the Company and DBS will accept the terms established by the Antitrust Commissioner in his decision regarding the merger on March 26, 2014, and the Company will exercise its option, at no cost, for the allotment of DBS shares at a rate of 8.6% of the issued capital of DBS.
Under the terms of the Acquisition Transaction, the Company will pay Eurocom DBS NIS 680 million in cash on the closing date, against acquisition of the shares and shareholder loans. Eurocom will also be entitled to two additional contingent considerations, as follows: the first additional consideration of up to NIS 200 million will be paid in accordance with the tax synergy and another consideration of up to NIS 170 million will be paid in accordance with the business results of DBS in the next three years.
Completion of the Acquisition Transaction is subject to the approval of the Ministry of Communications and the approval of general meeting of the Company's shareholders
Consolidated Pro Forma Financial Statements as at December 31, 2013
3.2 Assumptions that served in the preparation of the pro forma financial statements
|
|
3.2.1
|
The pro forma consolidated financial statements have been prepared to reflect the Company's financial position as at December 31, 2013 and the results of the Company's operations for the three years ended December 31, 2013, assuming a business combination with DBS, if completed, such that the Company's holdings in DBS will reach 58.36% of the issued capital of DBS as a result of the exercise of its option for 8.6% of DBS shares.
|
|
|
3.2.2
|
The pro forma consolidated financial statements are based on the consolidated financial statements of the Company and the financial statements of DBS as at December 31, 2013, which were prepared in accordance with International Financial Reporting Standards (IFRS).
|
|
|
3.2.3
|
The pro forma statement of financial position of the Company as at December 31, 2013 was prepared under the assumption that the business combination took place on December 31, 2013. The pro forma statements of income and pro forma statements of other comprehensive income were prepared under the assumption that the business combination took place on January 1, 2011.
|
|
|
3.2.4
|
Prior to acquiring control in DBS, as described above, the Company held 49.8% of its shares and accounted for this investment using the equity method. Accordingly, the consolidated statements of income included equity losses for this investment. As a result of the exercise of the option granted to it, the Company is expected to hold 58% of the interests in DBS. For the purpose of the pro forma statement of financial position as at December 31, 2013, the investment in DBS that was accounted for at equity was derecognized. In addition, for the purpose of the pro forma statement of income, the equity losses that were recognized were eliminated.
|
|
|
3.2.5
|
Acquisition of control was accounted for using the acquisition method in accordance with IFRS 3, Business Combinations. Accordingly, at the date of the Acquisition Transaction, the Company presented its investment in shares, share options and loans to DBS prior to combining the businesses, according to the equity method based on a valuation by an independent assessor whose opinion is attached to these statements. In accordance with the valuation, the value of the Company's investments prior to acquisition of control is estimated at NIS 1.099 billion. The Company recognized a gain of NIS 16 million from the acquisition of control in the pro forma statement of income for 2011.
|
|
|
3.2.6
|
To estimate the value of DBS's operations, the revenue approach was applied, For the purpose of the valuation, the discounted cash flow (DCF) method was applied based on the cash flow for the next five years. The cash flow forecast is based on the results of DBS for 2013 and the nine months ended September 30, 2014. In the valuation, it was assumed that the market share of DBS is expected to maintain stability throughout the years of the forecast. It was also assumed that a gradual erosion in the ARPU of DBS is expected in the short- and medium-term. The revenue forecast was prepared for five years, based on the forecast of the number of subscribers, average income and competition in the market. Cost of capital is 8.5% (after tax). It was also assumed that the perpetual growth rate will be 1%.
The valuation was based on assumptions regarding a participant in the relevant market that might acquire the Company's holdings in DBS and does not take into account the specific operational and tax synergies between the companies. The valuation is as at September 30, 2014.
|
|
|
3.2.7
|
The Company is currently preparing the allocation of the fair value for the tangible and intangible assets of DBS (PPA) through an external assessor. The PPA has not been completed. The PPA is attached to these statements. As at the approval date of this pro forma statement, the excess cost amounted to NIS 2,234 million. For the purpose of the pro forma statements, an excess cost that was determined provisionally will be allocated.
|
Consolidated Pro Forma Financial Statements as at December 31, 2013
The main points of valuation are as follows:
|
|
A.
|
Customer relations were estimated at NIS 761 million. The valuation was based on the income approach, using the multi-period excess earning method. Under this approach, the value of the asset is derived from the present value of the cash flows that are expected to arise from it over the remaining economic life of the asset. Amortization will be based on the economic life of customer relations, which was set at 7 years, taking into account the customer churn rate, which includes the churn rate for an amortization period of seven years, as follows: Years 1-2 - 20%, years 3-4 - 15%, and years 5-7 - 10%.
|
|
|
B.
|
Brand value - estimated at NIS 329 million. The valuation was prepared in accordance with the relief from royalty method, according to a remaining economic life of 12 years.
|
|
|
C.
|
Debentures - excess value over cost was estimated at NIS 180 million due to a decrease in yield to maturity of each debenture series. The interest rates underlying the discounted cash flows are 2.3% -2.6%.
|
|
|
D.
|
Eurocom shareholders loans - The fair value of the minority loans amounts to NIS 187 million, and, accordingly, the excess cost of these loans was derived and amounted to NIS 343 million.
|
|
|
E.
|
Goodwill - a value of NIS 981 million, constituting the difference between the consideration in the business combination and the fair value of the tangible assets, intangible assets and liabilities of DBS
|
|
|
3.2.8
|
Non-controlling interests were calculated based on their share of the fair value of the identified assets and liabilities, net as at the day of assuming control under the layers method. The share of non-controlling interests in equity as at the date of combining the businesses using the layers method amounts to 15%. The share of non-controlling interests in profit or loss in consecutive periods is in accordance with the rate of their share capital holding (41.64%). Reconciliation with the layers method is effected as an equity transaction with non-controlling interests.
|
|
|
3.2.9
|
In the statement of income, DBS losses continued under the layers method, using a weighted rate of the Company’s share of the losses of 85%.
|
|
Bezeq The Israel Telecommunication Corporation Limited
|
|
Consolidated Interim Pro Forma Financial Statements
|
Increase to a holding of 58% in DBS
Satellite Services (1998) Ltd.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
2
|
| |
|
|
Interim Condensed Pro Forma Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
|
|
3
|
|
|
5
|
|
|
8
|
| |
Somekh Chaikin |
Telephone |
972 2 531 2000 |
| |
8 Hartum Street, |
Fax |
972 2 531 2044 |
| |
PO Box 212, Jerusalem 91001 |
Internet |
www.kpmg.co.il |
“Bezeq” -The Israel Telecommunication Corporation Ltd.
Introduction
We have reviewed the accompanying pro forma financial information of “Bezeq” -The Israel Telecommunication Corporation Ltd. and its subsidiaries (hereinafter – “the Group”) comprising of the pro forma condensed consolidated interim statement of financial position as of September 30, 2014 and the related pro forma condensed consolidated interim statements of income and comprehensive income for the nine and three month periods then ended. The Board of Directors and Management are responsible for the preparation and presentation of interim financial information for these interim periods in accordance with IAS 34 “Interim Financial Reporting”, and are also responsible for the preparation of financial information for these interim periods in accordance with Regulation 38b of the Securities Regulations (Periodic and Immediate Reports), 1970. Our responsibility is to express a conclusion on pro forma interim financial information for these interim periods based on our review.
We did not review the condensed interim financial information of a certain consolidated subsidiary whose assets constitute 0.8% of the total consolidated assets as of September 30 2014, and whose revenues constitute 1.1% and 0.8% of the total consolidated revenues for the nine and three month periods then ended, respectively. The condensed interim financial information of that company was reviewed by other auditors whose review report thereon was furnished to us, and our conclusion, insofar as it relates to amounts emanating from the financial information of that company, is based solely on the said review report of the other auditors.
Scope of Review
We conducted our review in accordance with Standard on Review Engagements 1, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" of the Institute of Certified Public Accountants in Israel. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review and the review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying pro forma financial information was not prepared, in all material respects, in accordance with IAS 34.
In addition to that mentioned in the previous paragraph, based on our review and the review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying pro forma interim financial information does not comply, in all material respects, with the disclosure requirements of Regulation 38b of the Securities Regulations (Periodic and Immediate Reports), 1970 based on the assumptions set forth in Note 3.
Somekh Chaikin
Certified Public Accountants (Isr.)
February 15, 2015
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
Condensed Interim Pro Forma Consolidated Statement of Financial Position as at
|
| |
|
September 30, 2014
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Assets
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Cash and cash equivalents
|
|
|
1,599 |
|
|
|
208 |
|
|
|
1,807 |
|
|
Investments, including derivatives
|
|
|
2,495 |
|
|
|
- |
|
|
|
2,495 |
|
|
Trade receivables
|
|
|
2,225 |
|
|
|
161 |
|
|
|
2,386 |
|
|
Other receivables
|
|
|
286 |
|
|
|
17 |
|
|
|
303 |
|
|
Inventory
|
|
|
83 |
|
|
|
- |
|
|
|
83 |
|
|
Assets classified as held for sale
|
|
|
33 |
|
|
|
- |
|
|
|
33 |
|
|
Total current assets
|
|
|
6,721 |
|
|
|
386 |
|
|
|
7,107 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
567 |
|
|
|
- |
|
|
|
567 |
|
|
Broadcasting rights, net of rights exercised
|
|
|
- |
|
|
|
432 |
|
|
|
432 |
|
|
Property, plant and equipment
|
|
|
6,052 |
|
|
|
787 |
|
|
|
6,839 |
|
|
Intangible assets
|
|
|
1,810 |
|
|
|
2,057 |
|
|
|
3,867 |
|
|
Deferred and other expenses
|
|
|
255 |
|
|
|
41 |
|
|
|
296 |
|
|
Investments in equity-accounted investees (mainly loans)
|
|
|
1,043 |
|
|
|
(1,012 |
) |
|
|
31 |
|
|
Investments
|
|
|
85 |
|
|
|
- |
|
|
|
85 |
|
|
Deferred tax assets
|
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
|
Total non-current assets
|
|
|
9,818 |
|
|
|
2,305 |
|
|
|
12,123 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
16,539 |
|
|
|
2,691 |
|
|
|
19,230 |
|
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Condensed Interim Pro Forma Consolidated Statement of Financial Position as at (Cont’d)
|
| |
|
September 30, 2014
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments for pro forma data
|
|
|
Pro forma data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Liabilities and equity
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Debentures, loans and borrowings
|
|
|
1,491 |
|
|
|
377 |
|
|
|
1,868 |
|
|
Trade payables
|
|
|
572 |
|
|
|
421 |
|
|
|
993 |
|
|
Other payables, including derivatives
|
|
|
787 |
|
|
|
140 |
|
|
|
927 |
|
|
Current tax liabilities
|
|
|
592 |
|
|
|
- |
|
|
|
592 |
|
|
Provisions
|
|
|
124 |
|
|
|
9 |
|
|
|
133 |
|
|
Employee benefits
|
|
|
358 |
|
|
|
11 |
|
|
|
369 |
|
|
Dividend Payable
|
|
|
1,267 |
|
|
|
- |
|
|
|
1,267 |
|
|
Total current liabilities
|
|
|
5,191 |
|
|
|
958 |
|
|
|
6,149 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and debentures
|
|
|
8,872 |
|
|
|
1,586 |
|
|
|
10,458 |
|
|
Loans to minority shareholders in DBS
|
|
|
- |
|
|
|
186 |
|
|
|
186 |
|
|
Employee benefits
|
|
|
231 |
|
|
|
6 |
|
|
|
237 |
|
|
Provisions
|
|
|
69 |
|
|
|
- |
|
|
|
69 |
|
|
Deferred tax liabilities
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
|
Other liabilities, including derivatives
|
|
|
136 |
|
|
|
20 |
|
|
|
156 |
|
|
Total non-current liabilities
|
|
|
9,324 |
|
|
|
1,798 |
|
|
|
11,122 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
14,515 |
|
|
|
2,756 |
|
|
|
17,271 |
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributed to owners of the Company
|
|
|
2,024 |
|
|
|
87 |
|
|
|
2,111 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(152 |
) |
|
|
(152 |
) |
|
Total equity
|
|
|
2,024 |
|
|
|
(65 |
) |
|
|
1,959 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
16,539 |
|
|
|
2,691 |
|
|
|
19,230 |
|
| |
|
|
|
|
|
Yitzhak Edelman, outside
|
|
Stella Handler
|
|
David (Dudu) Mizrahi
|
|
director, Authorized to sign as chairman
of the chairman of the board
|
|
CEO
|
|
Deputy CEO and CFO
|
|
(see Note 2 below)
|
|
|
|
|
Date of approval of the pro forma financial statements: February 15, 2015
The attached notes are an integral part of these interim pro forma consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Interim Pro Forma Consolidated Statements of Income
|
| |
|
For the Nine-month Period Ending on
September 30, 2014
|
|
|
For the Nine-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
6,793 |
|
|
|
1,274 |
|
|
|
8,067 |
|
|
|
7,154 |
|
|
|
1,210 |
|
|
|
8,364 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
960 |
|
|
|
324 |
|
|
|
1,284 |
|
|
|
983 |
|
|
|
297 |
|
|
|
1,280 |
|
|
Salaries
|
|
|
1,328 |
|
|
|
197 |
|
|
|
1,525 |
|
|
|
1,431 |
|
|
|
186 |
|
|
|
1,617 |
|
|
General and operating expenses (Note 9)
|
|
|
2,513 |
|
|
|
644 |
|
|
|
3,157 |
|
|
|
2,610 |
|
|
|
624 |
|
|
|
3,234 |
|
|
Other operating income, net
|
|
|
(601 |
) |
|
|
- |
|
|
|
(601 |
) |
|
|
(96 |
) |
|
|
- |
|
|
|
(96 |
) |
| |
|
|
4,200 |
|
|
|
1,165 |
|
|
|
5,365 |
|
|
|
4,928 |
|
|
|
1,107 |
|
|
|
6,035 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,593 |
|
|
|
109 |
|
|
|
2,702 |
|
|
|
2,226 |
|
|
|
103 |
|
|
|
2,329 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
365 |
|
|
|
130 |
|
|
|
495 |
|
|
|
447 |
|
|
|
139 |
|
|
|
586 |
|
|
Financing income
|
|
|
(252 |
) |
|
|
135 |
|
|
|
(117 |
) |
|
|
(351 |
) |
|
|
174 |
|
|
|
(177 |
) |
|
Financing expenses, net
|
|
|
113 |
|
|
|
265 |
|
|
|
378 |
|
|
|
96 |
|
|
|
313 |
|
|
|
409 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,480 |
|
|
|
(156 |
) |
|
|
2,324 |
|
|
|
2,130 |
|
|
|
(210 |
) |
|
|
1,920 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
132 |
|
|
|
(127 |
) |
|
|
5 |
|
|
|
195 |
|
|
|
(196 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
2,348 |
|
|
|
(29 |
) |
|
|
2,319 |
|
|
|
1,935 |
|
|
|
(14 |
) |
|
|
1,921 |
|
|
Income tax
|
|
|
653 |
|
|
|
(7 |
) |
|
|
646 |
|
|
|
516 |
|
|
|
(3 |
) |
|
|
513 |
|
|
Profit for the period
|
|
|
1,695 |
|
|
|
(22 |
) |
|
|
1,673 |
|
|
|
1,419 |
|
|
|
(11 |
) |
|
|
1,408 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
1,695 |
|
|
|
42 |
|
|
|
1,737 |
|
|
|
1,419 |
|
|
|
73 |
|
|
|
1,492 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(64 |
) |
|
|
(64 |
) |
|
|
- |
|
|
|
(84 |
) |
|
|
(84 |
) |
|
Profit for the period
|
|
|
1,695 |
|
|
|
(22 |
) |
|
|
1,673 |
|
|
|
1,419 |
|
|
|
(11 |
) |
|
|
1,408 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.62 |
|
|
|
|
|
|
|
0.64 |
|
|
|
0.52 |
|
|
|
|
|
|
|
0.55 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.62 |
|
|
|
|
|
|
|
0.63 |
|
|
|
0.52 |
|
|
|
|
|
|
|
0.55 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
For the Nine-month Period Ending on September 30, 2014
|
|
|
For the Nine-month Period Ending on September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the period
|
|
|
1,695 |
|
|
|
(22 |
) |
|
|
1,673 |
|
|
|
1,419 |
|
|
|
(11 |
) |
|
|
1,408 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(33 |
) |
|
|
- |
|
|
|
(33 |
) |
|
|
(19 |
) |
|
|
- |
|
|
|
(19 |
) |
|
Total comprehensive income for the period
|
|
|
1,662 |
|
|
|
(22 |
) |
|
|
1,640 |
|
|
|
1,400 |
|
|
|
(11 |
) |
|
|
1,389 |
|
The attached notes are an integral part of these interim pro forma consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Interim Pro Forma Consolidated Statements of Income (Cont’d)
|
| |
|
For the Three-month Period Ending on
September 30, 2014
|
|
|
For the Three-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,232 |
|
|
|
432 |
|
|
|
2,664 |
|
|
|
2,398 |
|
|
|
409 |
|
|
|
2,807 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
327 |
|
|
|
110 |
|
|
|
437 |
|
|
|
329 |
|
|
|
100 |
|
|
|
429 |
|
|
Salaries
|
|
|
437 |
|
|
|
67 |
|
|
|
504 |
|
|
|
464 |
|
|
|
63 |
|
|
|
527 |
|
|
General and operating expenses
|
|
|
822 |
|
|
|
216 |
|
|
|
1,038 |
|
|
|
890 |
|
|
|
207 |
|
|
|
1,097 |
|
|
Other operating income, net
|
|
|
(25 |
) |
|
|
(1 |
) |
|
|
(26 |
) |
|
|
(6 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
| |
|
|
1,561 |
|
|
|
392 |
|
|
|
1,953 |
|
|
|
1,677 |
|
|
|
369 |
|
|
|
2,046 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
671 |
|
|
|
40 |
|
|
|
711 |
|
|
|
721 |
|
|
|
40 |
|
|
|
761 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
125 |
|
|
|
47 |
|
|
|
172 |
|
|
|
163 |
|
|
|
73 |
|
|
|
236 |
|
|
Financing income
|
|
|
(86 |
) |
|
|
46 |
|
|
|
(40 |
) |
|
|
(118 |
) |
|
|
74 |
|
|
|
(44 |
) |
|
Financing expenses, net
|
|
|
39 |
|
|
|
93 |
|
|
|
132 |
|
|
|
45 |
|
|
|
147 |
|
|
|
192 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
632 |
|
|
|
(53 |
) |
|
|
579 |
|
|
|
676 |
|
|
|
(107 |
) |
|
|
569 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
34 |
|
|
|
(33 |
) |
|
|
1 |
|
|
|
88 |
|
|
|
(89 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
598 |
|
|
|
(20 |
) |
|
|
578 |
|
|
|
588 |
|
|
|
(18 |
) |
|
|
570 |
|
|
Income tax
|
|
|
170 |
|
|
|
(4 |
) |
|
|
166 |
|
|
|
139 |
|
|
|
(5 |
) |
|
|
134 |
|
|
Profit for the period
|
|
|
428 |
|
|
|
(16 |
) |
|
|
412 |
|
|
|
449 |
|
|
|
(13 |
) |
|
|
436 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
428 |
|
|
|
6 |
|
|
|
434 |
|
|
|
449 |
|
|
|
26 |
|
|
|
475 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(22 |
) |
|
|
(22 |
) |
|
|
- |
|
|
|
(39 |
) |
|
|
(39 |
) |
|
Profit for the period
|
|
|
428 |
|
|
|
(16 |
) |
|
|
412 |
|
|
|
449 |
|
|
|
(13 |
) |
|
|
436 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.16 |
|
|
|
|
|
|
|
0.16 |
|
|
|
0.16 |
|
|
|
|
|
|
|
0.17 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
For the Three-month Period Ending on September 30, 2014
|
|
|
For the Three-month Period Ending on September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the period
|
|
|
428 |
|
|
|
(16 |
) |
|
|
412 |
|
|
|
449 |
|
|
|
(13 |
) |
|
|
436 |
|
|
Items of other comprehensive income (loss) (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(24 |
) |
|
|
- |
|
|
|
(24 |
) |
|
|
(9 |
) |
|
|
- |
|
|
|
(9 |
) |
|
Total comprehensive income for the period
|
|
|
404 |
|
|
|
(16 |
) |
|
|
388 |
|
|
|
440 |
|
|
|
(13 |
) |
|
|
427 |
|
The attached notes are an integral part of these interim pro forma consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Interim Pro Forma Consolidated Statements of Comprehensive Income (Cont’d)
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,563 |
|
|
|
1,624 |
|
|
|
11,187 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,311 |
|
|
|
404 |
|
|
|
1,715 |
|
|
Salaries
|
|
|
1,872 |
|
|
|
253 |
|
|
|
2,125 |
|
|
General and operating expenses
|
|
|
3,576 |
|
|
|
841 |
|
|
|
4,417 |
|
|
Other operating expenses (income), net
|
|
|
(15 |
) |
|
|
- |
|
|
|
(15 |
) |
| |
|
|
6,744 |
|
|
|
1,498 |
|
|
|
8,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,819 |
|
|
|
126 |
|
|
|
2,945 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
573 |
|
|
|
178 |
|
|
|
751 |
|
|
Financing income
|
|
|
(428 |
) |
|
|
219 |
|
|
|
(209 |
) |
|
Financing expenses, net
|
|
|
145 |
|
|
|
397 |
|
|
|
542 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,674 |
|
|
|
(271 |
) |
|
|
2,403 |
|
|
Share in losses of equity-accounted investees
|
|
|
252 |
|
|
|
(250 |
) |
|
|
2 |
|
|
Profit before income tax
|
|
|
2,422 |
|
|
|
(21 |
) |
|
|
2,401 |
|
|
Income tax
|
|
|
651 |
|
|
|
(5 |
) |
|
|
646 |
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
1,771 |
|
|
|
93 |
|
|
|
1,864 |
|
|
Non-controlling interests
|
|
|
- |
|
|
|
(109 |
) |
|
|
(109 |
) |
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.68 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
ata
|
|
|
Pro forma
data
|
|
| |
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
(16 |
) |
|
|
1,755 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial profit (loss), net of tax
|
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(16 |
) |
|
|
- |
|
|
|
(16 |
) |
|
Total comprehensive income for the year
|
|
|
1,777 |
|
|
|
(16 |
) |
|
|
1,761 |
|
The attached notes are an integral part of these interim pro forma consolidated financial statements.
|
Notes to the Pro Forma Consolidated Financial Statements
|
These interim pro forma consolidated financial statements are prepared in accordance with Regulation 38B of the Securities Regulations (Periodic and Immediate Reports), 1970 and refer to the acquisition of control in DBS Satellite Services (1998) Ltd. (“DBS”) by way of the exercise of an option for DBS shares by the company granted to it, at no cost, at a rate of 8.6% of the issued capital of DBS, as a result of which the Company’s holdings in DBS will reach 58%.
|
2.
|
The board of directors authorized external director Yitzhak Edelman, chairman of the committee for reviewing financial statements, to sign these interim pro forma consolidated financial statements instead of the chairman of the board, in accordance with Regulation 9(E) of the Securities Regulations (Periodic and Immediate Reports), 1970. These reports are an attachment to the reports published by the Company, inter alia, in accordance with the Securities Regulations (Transaction between the Company and its Controlling Shareholder), 2001, regarding the Company's engagement in the transaction for acquisition of the holdings of Eurocom DBS Ltd. ("Eurocom DBS") in DBS. The chairman of the board did not attend the board meeting for approval of these financial statements, for the sake of caution, being a controlling shareholder (indirectly) in Eurocom DBS. The other directors in the Company, who are relatives of the chairman of the board and/or officers of Eurocom Group, did not attend this meeting.
|
|
3.
|
The pro forma event and assumptions
|
Under the acquisition transaction described below, Company plans to engage in a transaction with a controlling shareholder in a company in which he has a personal interest, meaning, the Company will gain control of 100% of the holdings in DBS Satellite Services (1998) Ltd. (“DBS”). Following the transaction, if approved, DBS will become a wholly-owned subsidiary of the Company.
On February 10, 2015, the special subcommittee of the board of directors, audit committee and the board of directors of the Company approved a transaction between the Company and Eurocom DBS, which is a company controlled (indirectly) by Shaul and Yosef Elovitch, who are controlling shareholders of the Company. Under the transaction, if approved, the Company will acquire the entire holding of Eurocom DBS in DBS, which, as at this date, represents 50.22% of the issued share capital of DBS (41.62% fully diluted) and all of the owners loans provided by Eurocom to DBS ("the Acquisition Transaction"). Prior to the Acquisition Transaction, the Company and DBS will accept the terms established by the Antitrust Commissioner in his decision regarding the merger on March 26, 2014, and the Company will exercise its option, at no cost, for the allotment of DBS shares at a rate of 8.6% of the issued capital of DBS.
Under the terms of the Acquisition Transaction, the Company will pay Eurocom DBS NIS 680 million in cash on the closing date, against acquisition of the shares and shareholder loans. Eurocom will also be entitled to two additional contingent considerations, as follows: the first additional consideration of up to NIS 200 million will be paid in accordance with the tax synergy and another consideration of up to NIS 170 million will be paid in accordance with the business results of DBS in the next three years.
Completion of the Acquisition Transaction is subject to the approval of the Ministry of Communications and the approval of general meeting of the Company's shareholders
|
|
3.2.
|
Assumptions that served in the preparation of the pro forma financial statements
|
|
|
3.2.1
|
The pro forma consolidated financial statements have been prepared to reflect the Company's financial position as at September 30, 2014 and the results of the Company's operations for the nine and three months ended September 30, 2014 and September 30, 2013, respectively, assuming a business combination with DBS, if completed, such that the Company's holdings in DBS will reach 58.36% of the issued capital of DBS as a result of the exercise of its option for 8.6% of DBS shares.
|
Notes to Interim Pro Forma Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
3.2.2
|
The interim pro forma consolidated financial statements are based on the consolidated interim financial statements of the Company and the financial statements of DBS as at September 30, 2014, which were prepared in accordance with International Financial Reporting Standards (IFRS).
|
|
|
3.2.3
|
The interim pro forma statement of financial position of the Company as at September 30, 2014 was prepared under the assumption that the business combination took place on September 30, 2014. The interim pro forma statements of income and interim pro forma statements of other comprehensive income were prepared under the assumption that the combination of businesses took place on January 1, 2011.
|
|
|
3.2.4
|
Prior to acquiring control in DBS, as described above, the Company held 49.8% of its shares and accounted for this investment using the equity method. Accordingly, the consolidated statements of income included equity losses for this investment. As a result of the exercise of the option granted to it, the Company is expected to hold 58% of the interests in DBS. For the purpose of the interim pro forma statement of financial position as at September 30, 2014 the investment in DBS that was accounted for at equity was derecognized. In addition, for the purpose of the interim pro forma statement of income, the equity losses that were recognized by September 30, 2014, as above mentioned, were eliminated.
|
|
|
3.2.5
|
Acquisition of control was accounted for using the acquisition method in accordance with IFRS 3, Business Combinations. Accordingly, at the date of the Acquisition Transaction, the Company presented its investment in shares, share options and loans to DBS prior to combining the businesses, according to the equity method based on a valuation by an independent assessor whose opinion is attached to these statements. In accordance with the valuation, the value of the Company's investments prior to acquisition of control is estimated at NIS 1.099 billion. The Company recognized a gain of NIS 16 million from the acquisition of control in the pro forma statement of income for 2011.
|
|
|
3.2.6
|
To estimate the value of DBS's operations, the revenue approach was applied, For the purpose of the valuation, the discounted cash flow (DCF) method was applied based on the cash flow for the next five years. The cash flow forecast is based on the results of DBS for 2013 and the nine months ended September 30, 2014. In the valuation, it was assumed that the market share of DBS is expected to maintain stability throughout the years of the forecast. It was also assumed that a gradual erosion in the ARPU of DBS is expected in the short- and medium-term. The revenue forecast was prepared for five years, based on the forecast of the number of subscribers, average income and competition in the market. Cost of capital is 8.5% (after tax). It was also assumed that the perpetual growth rate will be 1%.
The valuation was based on assumptions regarding a participant in the relevant market that might acquire the Company's holdings in DBS and does not take into account the specific operational and tax synergies between the companies. The valuation is as at September 30, 2014.
|
|
|
3.2.7
|
The Company is currently preparing the allocation of the fair value for the tangible and intangible assets of DBS (PPA) through an external assessor. The PPA has not been completed. The PPA is attached to these statements. As at the approval date of this pro forma statement, the excess cost amounted to NIS 2,181 million. For the purpose of the pro forma statements, an excess cost that was determined provisionally will be allocated.
|
The main points of valuation are as follows:
|
|
A.
|
Customer relations were estimated at NIS 761 million. The valuation was based on the income approach, using the multi-period excess earning method. Under this approach, the value of the asset is derived from the present value of the cash flows that are expected to arise from it over the remaining economic life of the asset. Amortization will be based on the economic life of customer relations, which was set at 7 years, taking into account the customer churn rate, which includes the churn rate for an amortization period of seven years, as follows: Years 1-2 - 20%, years 3-4 - 15%, and years 5-7 - 10%.
|
Notes to Interim Pro Forma Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
B.
|
Brand value - estimated at NIS 329 million. The valuation was prepared in accordance with the relief from royalty method, according to a remaining economic life of 12 years.
|
|
|
C.
|
Debentures - excess value over cost was estimated at NIS 180 million due to a decrease in yield to maturity of each debenture series. The interest rates underlying the discounted cash flows are 2.3% -2.6%.
|
|
|
D.
|
Eurocom shareholders loans - The fair value of the minority loans amounts to NIS 187 million, and, accordingly, the excess cost of these loans was derived and amounted to NIS 397 million.
|
|
|
E.
|
Goodwill - a value of NIS 874 million, constituting the difference between the consideration in the business combination and the fair value of the tangible assets, intangible assets and liabilities of DBS
|
|
|
3.2.8
|
Non-controlling interests were calculated based on their share of the fair value of the identified net assets and the net liabilities, as at the day of assuming control under the layers method. The share of non-controlling interests in equity as at the date of combining the businesses using the layers method amounts to 15%. The share of non-controlling interests in profit or loss in consecutive periods is in accordance with the rate of their share capital holding (41.64%). Reconciliation with the layers method is effected as an equity transaction with non-controlling interests.
|
|
|
3.2.9
|
In the statement of income, DBS losses continued under the layers method, using a weighted rate of the Company’s share of the losses of 85%.
|
10
Exhibit 99.2
Bezeq The Israel Telecommunication
Corporation Limited
Consolidated Pro Forma Financial
Statements
|
Increase to a holding of 100% in DBS Satellite
Services (1998) Ltd.
|
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
|
2
|
| |
|
|
Pro Forma Consolidated Financial Statements as at December 31, 2013
|
|
|
|
3
|
|
|
5
|
|
|
7
|
| |
Somekh Chaikin |
Telephone |
972 2 531 2000 |
| |
8 Hartum Street, |
Fax |
972 2 531 2044 |
| |
PO Box 212, Jerusalem 91001 |
Internet |
www.kpmg.co.il |
Auditors' Report to the Shareholders of
"Bezeq" the Israeli Telecommunication Corporation Ltd.
We have audited the accompanying pro forma consolidated balance sheet of “Bezeq" the Israeli Telecommunication Corporation Ltd. (hereinafter “the Company”) as of December 31, 2013 and the pro forma consolidated income statements and statements of comprehensive income for each of the three years in the period ended December 31, 2013. These pro forma financial statements are the responsibility of the Company's Board of Directors and of its Management. Our responsibility is to express an opinion on these pro forma financial statements based on our audit.
We did not audit the financial statements of certain consolidated subsidiaries whose assets constitute 1.6% of the total consolidated assets as of December 31, 2013, and whose revenues constitute 1.3%, 1.6 % and 1.5 % of the total consolidated revenues for the years ended December 31, 2013, 2012 and 2011, respectively. The financial statements of those companies were audited by other auditors whose reports thereon were furnished to us, and our opinion, insofar as it relates to amounts emanating from the financial statements of such companies, is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards in Israel, including standards prescribed by the Auditors Regulations (Manner of Auditor's Performance) - 1973. Such standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors and by Management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the pro forma consolidated financial statements referred to above present fairly, in all material respects, the pro forma consolidated financial position of the Company and its consolidated subsidiaries as of December 31, 2013 and their pro forma results of operations for each of the three years in the period ended December 31, 2013, in accordance with Regulation 9a of the Securities Regulations (Periodic and Immediate Reports), 1970, based on the assumptions set forth in Note 3
Somekh Chaikin
Certified Public Accountants (Isr.)
February 15, 2015
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statement of Financial Position
|
| |
|
December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
610 |
|
|
|
(554 |
) |
|
|
56 |
|
|
Investments, including derivatives
|
|
|
1,132 |
|
|
|
- |
|
|
|
1,132 |
|
|
Trade receivables
|
|
|
2,651 |
|
|
|
118 |
|
|
|
2,769 |
|
|
Other receivables
|
|
|
344 |
|
|
|
2 |
|
|
|
346 |
|
|
Inventory
|
|
|
117 |
|
|
|
- |
|
|
|
117 |
|
|
Assets classified as held for sale
|
|
|
66 |
|
|
|
- |
|
|
|
66 |
|
|
Total current assets
|
|
|
4,920 |
|
|
|
(434 |
) |
|
|
4,486 |
|
|
Trade and other receivables
|
|
|
652 |
|
|
|
- |
|
|
|
652 |
|
|
Broadcasting rights, net of rights exercised
|
|
|
- |
|
|
|
417 |
|
|
|
417 |
|
|
Property, plant and equipment
|
|
|
5,973 |
|
|
|
775 |
|
|
|
6,748 |
|
|
Intangible assets
|
|
|
2,060 |
|
|
|
2,082 |
|
|
|
4,142 |
|
|
Deferred and other expenses
|
|
|
261 |
|
|
|
36 |
|
|
|
297 |
|
|
Investments in equity-accounted investees (mainly loans)
|
|
|
1,015 |
|
|
|
(979 |
) |
|
|
36 |
|
|
Investments
|
|
|
81 |
|
|
|
- |
|
|
|
81 |
|
|
Deferred tax assets
|
|
|
60 |
|
|
|
846 |
|
|
|
906 |
|
|
Total non-current assets
|
|
|
10,102 |
|
|
|
3,177 |
|
|
|
13,279 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
15,022 |
|
|
|
2,743 |
|
|
|
17,765 |
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
Debentures, loans and borrowings
|
|
|
1,136 |
|
|
|
328 |
|
|
|
1,464 |
|
|
Trade payables
|
|
|
719 |
|
|
|
422 |
|
|
|
1,141 |
|
|
Other payables, including derivatives
|
|
|
707 |
|
|
|
150 |
|
|
|
857 |
|
|
Current tax liabilities
|
|
|
523 |
|
|
|
- |
|
|
|
523 |
|
|
Provisions
|
|
|
125 |
|
|
|
13 |
|
|
|
138 |
|
|
Employee benefits
|
|
|
257 |
|
|
|
10 |
|
|
|
267 |
|
|
Total current liabilities
|
|
|
3,467 |
|
|
|
923 |
|
|
|
4,390 |
|
|
Loans and debentures
|
|
|
8,691 |
|
|
|
1,568 |
|
|
|
10,259 |
|
|
Employee benefits
|
|
|
234 |
|
|
|
6 |
|
|
|
240 |
|
|
Provisions
|
|
|
68 |
|
|
|
- |
|
|
|
68 |
|
|
Deferred tax liabilities
|
|
|
55 |
|
|
|
- |
|
|
|
55 |
|
|
Other liabilities, including derivatives
|
|
|
84 |
|
|
|
126 |
|
|
|
210 |
|
|
Total non-current liabilities
|
|
|
9,132 |
|
|
|
1,700 |
|
|
|
10,832 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,599 |
|
|
|
2,623 |
|
|
|
15,222 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,423 |
|
|
|
120 |
|
|
|
2,543 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
15,022 |
|
|
|
2,743 |
|
|
|
17,765 |
|
| |
|
|
|
|
|
Yitzhak Edelman, outside director (Authorized to sign as chairman of the board, see Note 2)
|
|
Stella Handler
CEO
|
|
David (Dudu) Mizrahi
Deputy CEO and CFO
|
| |
|
|
|
|
Date of approval of the pro forma financial statements: February 15, 2015
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,563 |
|
|
|
1,624 |
|
|
|
11,187 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,311 |
|
|
|
404 |
|
|
|
1,715 |
|
|
Salaries
|
|
|
1,872 |
|
|
|
253 |
|
|
|
2,125 |
|
|
General and operating expenses
|
|
|
3,576 |
|
|
|
841 |
|
|
|
4,417 |
|
|
Other operating income, net
|
|
|
(15 |
) |
|
|
- |
|
|
|
(15 |
) |
| |
|
|
6,744 |
|
|
|
1,498 |
|
|
|
8,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,819 |
|
|
|
126 |
|
|
|
2,945 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
573 |
|
|
|
132 |
|
|
|
705 |
|
|
Financing income
|
|
|
(428 |
) |
|
|
219 |
|
|
|
(209 |
) |
|
Financing expenses, net
|
|
|
145 |
|
|
|
351 |
|
|
|
496 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,674 |
|
|
|
(225 |
) |
|
|
2,449 |
|
|
Share in losses of equity-accounted investees
|
|
|
252 |
|
|
|
(250 |
) |
|
|
2 |
|
|
Profit before income tax
|
|
|
2,422 |
|
|
|
25 |
|
|
|
2,447 |
|
|
Income tax
|
|
|
651 |
|
|
|
8 |
|
|
|
659 |
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
17 |
|
|
|
1,788 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.66 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.65 |
|
|
Pro Forma Consolidated Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
17 |
|
|
|
1,788 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(16 |
) |
|
|
- |
|
|
|
(16 |
) |
|
Total comprehensive income for the year
|
|
|
1,777 |
|
|
|
17 |
|
|
|
1,794 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2012 |
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro Forma
data
|
|
| |
|
NIS million |
|
|
NIS million |
|
|
NIS million |
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
10,278 |
|
|
|
1,614 |
|
|
|
11,892 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,436 |
|
|
|
428 |
|
|
|
1,864 |
|
|
Salaries
|
|
|
1,976 |
|
|
|
244 |
|
|
|
2,220 |
|
|
General and operating expenses
|
|
|
3,953 |
|
|
|
869 |
|
|
|
4,822 |
|
|
Other operating income, net
|
|
|
(128 |
) |
|
|
- |
|
|
|
(128 |
) |
| |
|
|
7,237 |
|
|
|
1,541 |
|
|
|
8,778 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3,041 |
|
|
|
73 |
|
|
|
3,114 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
649 |
|
|
|
117 |
|
|
|
766 |
|
|
Financing income
|
|
|
(498 |
) |
|
|
192 |
|
|
|
(306 |
) |
|
Financing expenses, net
|
|
|
151 |
|
|
|
309 |
|
|
|
460 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,890 |
|
|
|
(236 |
) |
|
|
2,654 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
245 |
|
|
|
(248 |
) |
|
|
(3 |
) |
|
Profit before income tax
|
|
|
2,645 |
|
|
|
12 |
|
|
|
2,657 |
|
|
Income tax
|
|
|
778 |
|
|
|
5 |
|
|
|
783 |
|
|
Profit for the year
|
|
|
1,867 |
|
|
|
7 |
|
|
|
1,874 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
1,861 |
|
|
|
7 |
|
|
|
1,868 |
|
|
Non-controlling interests
|
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
|
Profit for the year
|
|
|
1,867 |
|
|
|
7 |
|
|
|
1,874 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.68 |
|
|
|
|
|
|
|
0.69 |
|
|
Pro Forma Consolidated Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2012
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro Forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
1,867 |
|
|
|
7 |
|
|
|
1,874 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses, net of tax
|
|
|
(20 |
) |
|
|
- |
|
|
|
(20 |
) |
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(7 |
) |
|
|
- |
|
|
|
(7 |
) |
|
Total comprehensive income for the year
|
|
|
1,840 |
|
|
|
7 |
|
|
|
1,847 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Pro Forma Consolidated Statements of Income
|
| |
|
Year ended December 31, 2011
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro Forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
11,373 |
|
|
|
1,603 |
|
|
|
12,976 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,395 |
|
|
|
456 |
|
|
|
1,851 |
|
|
Salaries
|
|
|
2,090 |
|
|
|
233 |
|
|
|
2,323 |
|
|
General and operating expenses
|
|
|
4,494 |
|
|
|
800 |
|
|
|
5,294 |
|
|
Other operating expenses (income), net
|
|
|
139 |
|
|
|
(16 |
) |
|
|
123 |
|
| |
|
|
8,118 |
|
|
|
1,473 |
|
|
|
9,591 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3,255 |
|
|
|
130 |
|
|
|
3,385 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
601 |
|
|
|
133 |
|
|
|
734 |
|
|
Financing income
|
|
|
(389 |
) |
|
|
165 |
|
|
|
(224 |
) |
|
Financing expenses, net
|
|
|
212 |
|
|
|
298 |
|
|
|
510 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
3,043 |
|
|
|
(168 |
) |
|
|
2,875 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
216 |
|
|
|
(217 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
2,827 |
|
|
|
49 |
|
|
|
2,876 |
|
|
Income tax
|
|
|
758 |
|
|
|
14 |
|
|
|
772 |
|
|
Profit for the year
|
|
|
2,069 |
|
|
|
35 |
|
|
|
2,104 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
2,074 |
|
|
|
35 |
|
|
|
2,109 |
|
|
Non-controlling interests
|
|
|
(5 |
) |
|
|
- |
|
|
|
(5 |
) |
|
Profit for the year
|
|
|
2,069 |
|
|
|
35 |
|
|
|
2,104 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.77 |
|
|
|
|
|
|
|
0.77 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.76 |
|
|
|
|
|
|
|
0.77 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2011
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the year
|
|
|
2,069 |
|
|
|
35 |
|
|
|
2,104 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
27 |
|
|
|
- |
|
|
|
27 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
|
Total comprehensive income for the year
|
|
|
2,104 |
|
|
|
35 |
|
|
|
2,139 |
|
The attached notes are an integral part of these pro forma consolidated financial statements.
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
Notes to the Pro Forma Consolidated Financial Statements
|
These pro forma consolidated financial statements are prepared in accordance with Regulation 9A of the Securities Regulations (Periodic and Immediate Reports), 1970 and refer to the acquisition of control in DBS Satellite Services (1998) Ltd. ("DBS") .
|
2.
|
The board of directors authorized the director Yitzhak Edelman, chairman of the committee for reviewing financial statements, to sign these pro forma consolidated financial statements instead of the chairman of the board, in accordance with Regulation 9(E) of the Securities Regulations (Periodic and Immediate Reports), 1970. These reports are an attachment to the reports published by the Company, inter alia, in accordance with the Securities Regulations (Transaction between the Company and its Controlling Shareholder), 2001, regarding the Company's engagement in the transaction for acquisition of the holdings of Eurocom DBS Ltd. ("Eurocom DBS") in DBS. The chairman of the board did not attend the board meeting for approval of these financial statements, for the sake of caution, being a controlling shareholder (indirectly) in Eurocom DBS. The other directors in the Company, who are relatives of the chairman of the board and/or officers of Eurocom Group, did not attend this meeting.
|
|
3.
|
The pro forma event and assumptions
|
Under the acquisition transaction described below, Company plans to engage in a transaction with a controlling shareholder in a company in which he has a personal interest, meaning, the Company will gain control of 100% of the holdings in DBS. Following the transaction, if approved, DBS will become a wholly-owned subsidiary of the Company.
On February 10, 2015, the special subcommittee of the board of directors, audit committee and the board of directors of the Company approved a transaction between the Company and Eurocom DBS, which is a company controlled (indirectly) by Shaul and Yosef Elovitch, who are controlling shareholders of the Company. Under the transaction, if approved, the Company will acquire the entire holding of Eurocom DBS in DBS, which, as at this date, represents 50.22% of the issued share capital of DBS (41.62% fully diluted) and all of the owners loans provided by Eurocom to DBS ("the Acquisition Transaction"). Prior to the Acquisition Transaction, the Company and DBS will accept the terms established by the Antitrust Commissioner in his decision regarding the merger on March 26, 2014, and the Company will exercise its option, at no cost, for the allotment of DBS shares at a rate of 8.6% of the issued capital of DBS.
Under the terms of the Acquisition Transaction, the Company will pay Eurocom DBS NIS 680 million in cash on the closing date, against acquisition of the shares and shareholder loans. Eurocom will also be entitled to two additional contingent considerations, as follows: the first additional consideration of up to NIS 200 million will be paid in accordance with the tax synergy and another consideration of up to NIS 170 million will be paid in accordance with the business results of DBS in the next three years.
Completion of the Acquisition Transaction is subject to the approval of the Ministry of Communications and the approval of general meeting of the Company's shareholders
| |
3.2.
|
Assumptions that served in the preparation of the pro forma financial statements
|
|
|
3.2.1
|
The pro forma consolidated financial statements have been prepared to reflect the Company's financial position as at December 31, 2013 and the results of the Company's operations for the three years ended December 31, 2013, assuming a business combination with DBS, if completed, such that the Company's holdings in DBS will reach 100% of the issued capital of DBS as a result of the exercise of the option granted to it and acquisition of the holdings of Eurocom DBS as described in Note 3.1 above.
|
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
|
3.2.2
|
The pro forma consolidated financial statements are based on the consolidated financial statements of the Company and the financial statements of DBS as at December 31, 2013, which were prepared in accordance with International Financial Reporting Standards (IFRS).
|
|
|
3.2.3
|
The pro forma statement of financial position of the Company as at December 31, 2013 was prepared under the assumption that the Acquisition Transaction took place on December 31, 2013. The pro forma statements of income and pro forma statements of other comprehensive income were prepared under the assumption that the Acquisition Transaction took place on January 1, 2011.
|
|
|
3.2.4
|
Prior to acquiring control in DBS, as described above, the Company held 49.8% of its shares and accounted for this investment using the equity method. Accordingly, the consolidated statements of income included equity losses for this investment. Following the Acquisition Transaction, if completed, the Company is expected to hold 100% of the interests in DBS. For the purpose of the pro forma statement of financial position as at December 31, 2013, the investment in DBS that was accounted for at equity was derecognized. In addition, for the purpose of the pro forma statement of income, the equity losses that were recognized were eliminated.
|
|
|
3.2.5
|
Acquisition of control was accounted for using the acquisition method in accordance with IFRS 3, Business Combinations. Accordingly, at the date of the Acquisition Transaction, the Company presented its investment in shares, share options and loans to DBS prior to acquisition of control, according to the equity method based on a valuation by an independent assessor whose opinion is attached to these statements. In accordance with the valuation, the value of the Company's investments prior to acquisition of control is estimated at NIS 1.099 billion. The Company recognized a gain of NIS 16 million from the acquisition of control in the pro forma statement of income for 2011.
|
|
|
3.2.6
|
To estimate the value of DBS's operations, the revenue approach was applied, For the purpose of the valuation, the discounted cash flow (DCF) method was applied based on the cash flow for the next five years. The cash flow forecast is based on the results of DBS for 2013 and the nine months ended September 30, 2014. In the valuation, it was assumed that the market share of DBS is expected to maintain stability throughout the years of the forecast. It was also assumed that a gradual erosion in the ARPU of DBS is expected in the short- and medium-term. The revenue forecast was prepared for five years, based on the forecast of the number of subscribers, average income and competition in the market. Cost of capital is 8.5% (after tax). It was also assumed that the perpetual growth rate will be 1%.
|
The valuation was based on assumptions regarding a participant in the relevant market that might acquire the Company's holdings in DBS and does not take into account the specific operational and tax synergies between the companies. The valuation is as at September 30, 2014.
|
|
3.2.7
|
Value of the Acquisition Transaction
|
|
|
A.
|
The fair value of the first additional contingent consideration of up to NIS 200 million, which will be paid in accordance with the tax synergy, was calculated according to the economic valuation based on the forecast for utilization of DBS's accumulated losses for tax purposes over 10 years, and using a discount rate of 8.5%. The fair value of the first additional consideration was estimated by the assessor as NIS 83 million.
|
|
|
B.
|
The fair value of the additional contingent consideration of up to NIS 170 million, which will be paid in accordance with the business results of DBS in the next three years, was calculated according to an economic valuation based on the anticipated future performance of DBS. The estimated fair value of this consideration is estimated as NIS18 million.
|
|
|
C.
|
The total acquisition cost of the consideration and additional contingent considerations of this transaction in the pro forma financial statements is NIS 781 million.
|
Consolidated Pro Forma Financial Statements as at December 31, 2013
|
|
D.
|
The Company assumes that there is no change in the fair value of the contingent consideration in the periods.
|
|
|
3.2.8
|
The Company is currently preparing the allocation of the fair value for the tangible and intangible assets of DBS (PPA) through an external assessor. The PPA has not been completed. The PPA is attached to these statements. As at the approval date of this pro forma statement, the excess cost amounted to NIS 2,652 million. For the purpose of the pro forma statements, an excess cost that was determined provisionally will be allocated.
|
The main points of valuation are as follows:
|
|
A.
|
Customer relations were estimated at NIS 761 million. The valuation was based on the income approach, using the multi-period excess earning method. Under this approach, the value of the asset is derived from the present value of the cash flows that are expected to arise from it over the remaining economic life of the asset. Amortization will be based on the economic life of customer relations, which was set at 7 years, taking into account the customer churn rate, which includes the churn rate for an amortization period of seven years, as follows: Years 1-2 - 20%, years 3-4 - 15%, and years 5-7 - 10%.
|
|
|
B.
|
Brand value - estimated at NIS 329 million. The valuation was prepared in accordance with the relief from royalty method, according to a remaining economic life of 12 years.
|
|
|
C.
|
Debentures - excess value over cost was estimated at NIS 180 million due to a decrease in yield to maturity of each debenture series. The interest rates underlying the discounted cash flows are 2.3% -2.6%.
|
|
|
D.
|
Deferred tax asset - the value attributed to the tax asset is NIS 847 million, as follows:
|
| |
|
NIS million
|
|
|
Tax asset for cumulative losses
|
|
|
1,087 |
|
|
Tax reserve for attributed excess cost
|
|
|
(240 |
) |
| |
|
|
847 |
|
The Company believes that it will be able to take advantage of the tax asset for the accrued losses from the future profits of DBS and due to the possible merger between the companies.
|
|
E.
|
Goodwill - a value of NIS 895 million, constituting the difference between the consideration in the business combination and the fair value of the tangible assets, intangible assets and liabilities of DBS
|
Bezeq The Israel Telecommunication
Corporation Limited
Consolidated Pro Forma Financial
Statements
Increase to a holding of 100% in DBS Satellite
Services (1998) Ltd.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
2
|
| |
|
|
Condensed Pro Forma Consolidated Interim Financial Statements as at September 30, 2014 (Unaudited)
|
|
|
|
3
|
|
|
5
|
|
|
8
|
| |
Somekh Chaikin |
Telephone |
972 2 531 2000 |
| |
8 Hartum Street, |
Fax |
972 2 531 2044 |
| |
PO Box 212, Jerusalem 91001 |
Internet |
www.kpmg.co.il |
Review Report to the Shareholders of
“Bezeq” -The Israel Telecommunication Corporation Ltd.
Introduction
We have reviewed the accompanying pro forma financial information of “Bezeq” -The Israel Telecommunication Corporation Ltd. and its subsidiaries (hereinafter – “the Group”) comprising of the pro forma condensed consolidated interim statement of financial position as of September 30, 2014 and the related pro forma condensed consolidated interim statements of income and comprehensive income for the nine and three month periods then ended. The Board of Directors and Management are responsible for the preparation and presentation of interim financial information for these interim periods in accordance with IAS 34 “Interim Financial Reporting”, and are also responsible for the preparation of financial information for these interim periods in accordance with Regulation 38b of the Securities Regulations (Periodic and Immediate Reports), 1970. Our responsibility is to express a conclusion on pro forma interim financial information for these interim periods based on our review.
We did not review the condensed interim financial information of a certain consolidated subsidiary whose assets constitute 0.8% of the total consolidated assets as of September 30 2014, and whose revenues constitute 1.1% and 0.8% of the total consolidated revenues for the nine and three month periods then ended, respectively. The condensed interim financial information of that company was reviewed by other auditors whose review report thereon was furnished to us, and our conclusion, insofar as it relates to amounts emanating from the financial information of that company, is based solely on the said review report of the other auditors.
Scope of Review
We conducted our review in accordance with Standard on Review Engagements 1, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" of the Institute of Certified Public Accountants in Israel. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review and the review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying pro forma financial information was not prepared, in all material respects, in accordance with IAS 34.
In addition to that mentioned in the previous paragraph, based on our review andthe review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying pro forma interim financial information does not comply, in all material respects, with the disclosure requirements of Regulation 38b of the Securities Regulations (Periodic and Immediate Reports), 1970 based on the assumptions set forth in Note 3.
Somekh Chaikin
Certified Public Accountants (Isr.)
February 15, 2015
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Condensed Interim Pro Forma Consolidated Statement of Financial Position as at
|
| |
|
September 30, 2014
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Assets
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Cash and cash equivalents
|
|
|
1,599 |
|
|
|
(472 |
) |
|
|
1,127 |
|
|
Investments, including derivatives
|
|
|
2,495 |
|
|
|
- |
|
|
|
2,495 |
|
|
Trade receivables
|
|
|
2,225 |
|
|
|
161 |
|
|
|
2,386 |
|
|
Other receivables
|
|
|
286 |
|
|
|
17 |
|
|
|
303 |
|
|
Inventory
|
|
|
83 |
|
|
|
- |
|
|
|
83 |
|
|
Assets classified as held for sale
|
|
|
33 |
|
|
|
- |
|
|
|
33 |
|
|
Total current assets
|
|
|
6,721 |
|
|
|
(294 |
) |
|
|
6,427 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
567 |
|
|
|
- |
|
|
|
567 |
|
|
Broadcasting rights, net of rights exercised
|
|
|
- |
|
|
|
432 |
|
|
|
432 |
|
|
Property, plant and equipment
|
|
|
6,052 |
|
|
|
787 |
|
|
|
6,839 |
|
|
Intangible assets
|
|
|
1,810 |
|
|
|
1,958 |
|
|
|
3,768 |
|
|
Deferred and other expenses
|
|
|
255 |
|
|
|
41 |
|
|
|
296 |
|
|
Investments in equity-accounted investees (mainly loans)
|
|
|
1,043 |
|
|
|
(1,012 |
) |
|
|
31 |
|
|
Investments
|
|
|
85 |
|
|
|
- |
|
|
|
85 |
|
|
Deferred tax assets
|
|
|
6 |
|
|
|
846 |
|
|
|
852 |
|
|
Total non-current assets
|
|
|
9,818 |
|
|
|
3,052 |
|
|
|
12,870 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
16,539 |
|
|
|
2,758 |
|
|
|
19,297 |
|
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Condensed Interim Pro Forma Consolidated Statement of Financial Position as at (Cont’d)
|
| |
|
September 30, 2014
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Liabilities and equity
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Debentures, loans and borrowings
|
|
|
1,491 |
|
|
|
377 |
|
|
|
1,868 |
|
|
Trade payables
|
|
|
572 |
|
|
|
421 |
|
|
|
993 |
|
|
Other payables, including derivatives
|
|
|
787 |
|
|
|
140 |
|
|
|
927 |
|
|
Current tax liabilities
|
|
|
592 |
|
|
|
- |
|
|
|
592 |
|
|
Provisions
|
|
|
124 |
|
|
|
9 |
|
|
|
133 |
|
|
Employee benefits
|
|
|
358 |
|
|
|
11 |
|
|
|
369 |
|
|
Dividend Payable
|
|
|
1,267 |
|
|
|
- |
|
|
|
1,267 |
|
|
Total current liabilities
|
|
|
5,191 |
|
|
|
958 |
|
|
|
6,149 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and debentures
|
|
|
8,872 |
|
|
|
1,586 |
|
|
|
10,458 |
|
|
Employee benefits
|
|
|
231 |
|
|
|
6 |
|
|
|
237 |
|
|
Provisions
|
|
|
69 |
|
|
|
- |
|
|
|
69 |
|
|
Deferred tax liabilities
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
|
Other liabilities, including derivatives
|
|
|
136 |
|
|
|
121 |
|
|
|
257 |
|
|
Total non-current liabilities
|
|
|
9,324 |
|
|
|
1,713 |
|
|
|
11,037 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
14,515 |
|
|
|
2,671 |
|
|
|
17,186 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,024 |
|
|
|
87 |
|
|
|
2,111 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
|
16,539 |
|
|
|
2,758 |
|
|
|
19,297 |
|
|
|
|
|
|
|
|
Yitzhak Edelman, outside director
|
|
Stella Handler
|
|
David (Dudu) Mizrahi
|
|
(Authorized to sign as Chairman
of the Board see Note 2 below)
|
|
CEO
|
|
Deputy CEO and CFO
|
Date of approval of the pro forma financial statements: February 15, 2015
The attached notes are an integral part of these pro forma interim consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Condensed Pro Forma Consolidated Interim Statements of Income
|
| |
|
For the Nine-month Period Ending on
September 30, 2014
|
|
|
For the Nine-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
6,793 |
|
|
|
1,274 |
|
|
|
8,067 |
|
|
|
7,154 |
|
|
|
1,210 |
|
|
|
8,364 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
960 |
|
|
|
324 |
|
|
|
1,284 |
|
|
|
983 |
|
|
|
297 |
|
|
|
1,280 |
|
|
Salaries
|
|
|
1,328 |
|
|
|
197 |
|
|
|
1,525 |
|
|
|
1,431 |
|
|
|
186 |
|
|
|
1,617 |
|
|
General and operating expenses (Note 9)
|
|
|
2,513 |
|
|
|
644 |
|
|
|
3,157 |
|
|
|
2,610 |
|
|
|
624 |
|
|
|
3,234 |
|
|
Other operating income, net
|
|
|
(601 |
) |
|
|
- |
|
|
|
(601 |
) |
|
|
(96 |
) |
|
|
- |
|
|
|
(96 |
) |
| |
|
|
4,200 |
|
|
|
1,165 |
|
|
|
5,365 |
|
|
|
4,928 |
|
|
|
1,107 |
|
|
|
6,035 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,593 |
|
|
|
109 |
|
|
|
2,702 |
|
|
|
2,226 |
|
|
|
103 |
|
|
|
2,329 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
365 |
|
|
|
95 |
|
|
|
460 |
|
|
|
447 |
|
|
|
103 |
|
|
|
550 |
|
|
Financing income
|
|
|
(252 |
) |
|
|
135 |
|
|
|
(117 |
) |
|
|
(351 |
) |
|
|
174 |
|
|
|
(177 |
) |
|
Financing expenses, net
|
|
|
113 |
|
|
|
230 |
|
|
|
343 |
|
|
|
96 |
|
|
|
277 |
|
|
|
373 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,480 |
|
|
|
(121 |
) |
|
|
2,359 |
|
|
|
2,130 |
|
|
|
(174 |
) |
|
|
1,956 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
132 |
|
|
|
(127 |
) |
|
|
5 |
|
|
|
195 |
|
|
|
(196 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
2,348 |
|
|
|
6 |
|
|
|
2,354 |
|
|
|
1,935 |
|
|
|
22 |
|
|
|
1,957 |
|
|
Income tax
|
|
|
653 |
|
|
|
3 |
|
|
|
656 |
|
|
|
516 |
|
|
|
7 |
|
|
|
523 |
|
|
Profit for the period
|
|
|
1,695 |
|
|
|
3 |
|
|
|
1,698 |
|
|
|
1,419 |
|
|
|
15 |
|
|
|
1,434 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.62 |
|
|
|
|
|
|
|
0.62 |
|
|
|
0.52 |
|
|
|
|
|
|
|
0.53 |
|
|
Diluted earnings per share
|
|
|
0.62 |
|
|
|
|
|
|
|
0.62 |
|
|
|
0.52 |
|
|
|
|
|
|
|
0.52 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
For the Nine-month Period Ending on
September 30, 2014
|
|
|
For the Nine-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the period
|
|
|
1,695 |
|
|
|
3 |
|
|
|
1,698 |
|
|
|
1,419 |
|
|
|
15 |
|
|
|
1,434 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(33 |
) |
|
|
- |
|
|
|
(33 |
) |
|
|
(19 |
) |
|
|
- |
|
|
|
(19 |
) |
|
Total comprehensive income for the period
|
|
|
1,662 |
|
|
|
3 |
|
|
|
1,665 |
|
|
|
1,400 |
|
|
|
15 |
|
|
|
1,415 |
|
The attached notes are an integral part of these pro forma interim consolidated financial statements.
|
Condensed Pro Forma Consolidated Interim Statements of Income (Cont’d)
|
| |
|
For the Three-month Period Ending on
September 30, 2014
|
|
|
For the Three-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,232 |
|
|
|
432 |
|
|
|
2,664 |
|
|
|
2,398 |
|
|
|
409 |
|
|
|
2,807 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
327 |
|
|
|
110 |
|
|
|
437 |
|
|
|
329 |
|
|
|
100 |
|
|
|
429 |
|
|
Salaries
|
|
|
437 |
|
|
|
67 |
|
|
|
504 |
|
|
|
464 |
|
|
|
63 |
|
|
|
527 |
|
|
General and operating expenses (Note 9)
|
|
|
822 |
|
|
|
216 |
|
|
|
1,038 |
|
|
|
890 |
|
|
|
207 |
|
|
|
1,097 |
|
|
Other operating income, net
|
|
|
(25 |
) |
|
|
(1 |
) |
|
|
(26 |
) |
|
|
(6 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
| |
|
|
1,561 |
|
|
|
392 |
|
|
|
1,953 |
|
|
|
1,677 |
|
|
|
369 |
|
|
|
2,046 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
671 |
|
|
|
40 |
|
|
|
711 |
|
|
|
721 |
|
|
|
40 |
|
|
|
761 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
125 |
|
|
|
34 |
|
|
|
159 |
|
|
|
163 |
|
|
|
47 |
|
|
|
210 |
|
|
Financing income
|
|
|
(86 |
) |
|
|
46 |
|
|
|
(40 |
) |
|
|
(118 |
) |
|
|
74 |
|
|
|
(44 |
) |
|
Financing expenses, net
|
|
|
39 |
|
|
|
80 |
|
|
|
119 |
|
|
|
45 |
|
|
|
121 |
|
|
|
166 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
632 |
|
|
|
(40 |
) |
|
|
592 |
|
|
|
676 |
|
|
|
(81 |
) |
|
|
595 |
|
|
Share in the losses (profits) of equity-accounted investees
|
|
|
34 |
|
|
|
(33 |
) |
|
|
1 |
|
|
|
88 |
|
|
|
(89 |
) |
|
|
(1 |
) |
|
Profit before income tax
|
|
|
598 |
|
|
|
(7 |
) |
|
|
591 |
|
|
|
588 |
|
|
|
8 |
|
|
|
596 |
|
|
Income tax
|
|
|
170 |
|
|
|
(1 |
) |
|
|
169 |
|
|
|
139 |
|
|
|
2 |
|
|
|
141 |
|
|
Profit for the period
|
|
|
428 |
|
|
|
(6 |
) |
|
|
422 |
|
|
|
449 |
|
|
|
6 |
|
|
|
455 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.16 |
|
|
|
|
|
|
|
0.15 |
|
|
|
0.16 |
|
|
|
|
|
|
|
0.17 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
For the Three-month Period Ending on
September 30, 2014
|
|
|
For the Three-month Period Ending on
September 30, 2013
|
|
| |
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
|
Prior to the
pro forma
event
|
|
|
Adjustments
for pro forma
data
|
|
|
Pro forma
data
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
|
Profit for the period
|
|
|
428 |
|
|
|
(6 |
) |
|
|
422 |
|
|
|
449 |
|
|
|
6 |
|
|
|
455 |
|
|
Items of other comprehensive income (loss) (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(24 |
) |
|
|
- |
|
|
|
(24 |
) |
|
|
(9 |
) |
|
|
- |
|
|
|
(9 |
) |
|
Total comprehensive income for the period
|
|
|
404 |
|
|
|
(6 |
) |
|
|
398 |
|
|
|
440 |
|
|
|
6 |
|
|
|
446 |
|
The attached notes are an integral part of these pro forma interim consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Condensed Pro Forma Consolidated Interim Statements of Income (Cont’d)
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the pro forma event
|
|
|
Adjustments for pro forma data
|
|
|
Pro forma data
|
|
| |
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,563 |
|
|
|
1,624 |
|
|
|
11,187 |
|
|
Costs of activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,311 |
|
|
|
404 |
|
|
|
1,715 |
|
|
Salaries
|
|
|
1,872 |
|
|
|
253 |
|
|
|
2,125 |
|
|
General and operating expenses
|
|
|
3,576 |
|
|
|
841 |
|
|
|
4,417 |
|
|
Other operating income, net
|
|
|
(15 |
) |
|
|
- |
|
|
|
(15 |
) |
| |
|
|
6,744 |
|
|
|
1,498 |
|
|
|
8,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
2,819 |
|
|
|
126 |
|
|
|
2,945 |
|
|
Financing expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expenses
|
|
|
573 |
|
|
|
132 |
|
|
|
705 |
|
|
Financing income
|
|
|
(428 |
) |
|
|
219 |
|
|
|
(209 |
) |
|
Financing expenses, net
|
|
|
145 |
|
|
|
351 |
|
|
|
496 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after financing expenses, net
|
|
|
2,674 |
|
|
|
(225 |
) |
|
|
2,449 |
|
|
Share in losses of equity-accounted investees
|
|
|
252 |
|
|
|
(250 |
) |
|
|
2 |
|
|
Profit before income tax
|
|
|
2,422 |
|
|
|
25 |
|
|
|
2,447 |
|
|
Income tax
|
|
|
651 |
|
|
|
8 |
|
|
|
659 |
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
17 |
|
|
|
1,788 |
|
|
Earnings per share (NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.66 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.65 |
|
|
|
|
|
|
|
0.65 |
|
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
| |
|
Year ended December 31, 2013
|
|
| |
|
Prior to the pro forma event
|
|
|
Adjustments for pro forma data
|
|
|
Pro forma data
|
|
| |
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
| |
|
NIS million
|
|
|
NIS million
|
|
|
NIS million
|
|
| |
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
1,771 |
|
|
|
17 |
|
|
|
1,788 |
|
|
Items of other comprehensive income not transferred to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains, net of tax
|
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
Items of other comprehensive income (net of tax) to be transferred to profit or loss subsequent to initial recognition in comprehensive income
|
|
|
(16 |
) |
|
|
- |
|
|
|
(16 |
) |
|
Total comprehensive income for the year
|
|
|
1,777 |
|
|
|
17 |
|
|
|
1,794 |
|
The attached notes are an integral part of these pro forma interim consolidated financial statements.
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
Notes to the Pro Forma Consolidated Financial Statements
|
These interim pro forma consolidated financial statements are prepared in accordance with Regulation 38B of the Securities Regulations (Periodic and Immediate Reports), 1970 and refer to the acquisition of control in DBS Satellite Services (1998) Ltd. ("DBS").
|
2.
|
The board of directors authorized the director Yitzhak Edelman, chairman of the committee for reviewing financial statements, to sign these pro forma interim consolidated financial statements instead of the chairman of the board, in accordance with Regulation 9(E) of the Securities Regulations (Periodic and Immediate Reports), 1970. These reports are an attachment to the reports published by the Company, inter alia, in accordance with the Securities Regulations (Transaction between the Company and its Controlling Shareholder), 2001, regarding the Company's engagement in the transaction for acquisition of the holdings of Eurocom DBS Ltd. ("Eurocom DBS") in DBS. The chairman of the board did not attend the board meeting for approval of these financial statements, for the sake of caution, being a controlling shareholder (indirectly) in Eurocom DBS. The other directors in the Company, who are relatives of the chairman of the board and/or officers of Eurocom Group, did not attend this meeting.
|
|
3.
|
The pro forma event and assumptions
|
Under the acquisition transaction described below, the Company plans to engage in a transaction with a controlling shareholder in a company in which he has a personal interest, meaning, the Company will gain control of 100% of the holdings in DBS. Following the transaction, if approved, DBS will become a wholly-owned subsidiary of the Company.
On February 10, 2015, the special subcommittee of the board of directors, audit committee and the board of directors of the Company approved a transaction between the Company and Eurocom DBS, which is a company controlled (indirectly) by Shaul and Yosef Elovitch, who are controlling shareholders of the Company. Under the transaction, if approved, the Company will acquire the entire holding of Eurocom DBS in DBS, which, as at this date, represents 50.22% of the issued share capital of DBS (41.62% fully diluted) and all of the shareholder loans provided by Eurocom to DBS ("the Acquisition Transaction"). Prior to the Acquisition Transaction, the Company and DBS will accept the terms established by the Antitrust Commissioner in his decision regarding the merger on March 26, 2014, and the Company will exercise its option, at no cost, for the allotment of DBS shares at a rate of 8.6% of the issued capital of DBS.
Under the terms of the Acquisition Transaction, the Company will pay Eurocom DBS NIS 680 million in cash on the closing date, against acquisition of the shares and shareholder loans. Eurocom will also be entitled to two additional contingent considerations, as follows: the first additional consideration of up to NIS 200 million will be paid in accordance with the tax synergy and another consideration of up to NIS 170 million will be paid in accordance with the business results of DBS in the next three years.
Completion of the Acquisition Transaction is subject to the approval of the Ministry of Communications and the approval of general meeting of the Company's shareholders
| |
3.2.
|
Assumptions that served in the preparation of the pro forma financial statements
|
|
|
3.2.1
|
The interim pro forma consolidated financial statements have been prepared to reflect the Company's financial position as at September 30, 2014 and the results of the Company's operations for the nine and three months ended September 30, 2014, assuming a business combination with DBS, if completed, such that the Company's holdings in DBS will reach 100% of the issued capital of DBS as a result of the exercise of the option granted to it and acquisition of the holdings of Eurocom DBS as described in Note 3.1 above.
|
|
|
3.2.2
|
The interim pro forma consolidated financial statements are based on the consolidated interim financial statements of the Company and the financial statements of DBS as at September 30, 2014, which were prepared in accordance with International Financial Reporting Standards (IFRS).
|
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
3.2.3
|
The interim pro forma statement of financial position of the Company as at September 30, 2014 was prepared under the assumption that the Acquisition Transaction took place on September 30, 2014. The pro forma interim statements of income and pro forma interim statements of other comprehensive income were prepared under the assumption that the Acquisition Transaction took place on January 1, 2011.
|
|
|
3.2.4
|
Prior to acquiring control in DBS, as described above, the Company held 49.8% of its shares and accounted for this investment using the equity method. Accordingly, the consolidated interim statements of income included equity losses for this investment. Following the Acquisition Transaction, if completed, the Company is expected to hold 100% of the interests in DBS. For the purpose of the interim pro forma statement of financial position as at September 30, 2014 the investment in DBS that was accounted for at equity was derecognized. In addition, for the purpose of the pro forma interim statement of income, the equity losses that were recognized were eliminated.
|
|
|
3.2.5
|
Acquisition of control was accounted for using the acquisition method in accordance with IFRS 3, Business Combinations. Accordingly, at the date of the Acquisition Transaction, the Company presented its investment in shares, share options and loans to DBS prior to acquisition of control, according to the equity method based on a valuation by an independent assessor whose opinion is attached to these statements. In accordance with the valuation, the value of the Company's investments prior to acquisition of control is estimated at NIS 1.099 billion. The Company recognized a gain of NIS 16 million from the acquisition of control in the pro forma statement of income for 2011.
|
|
|
3.2.6
|
To estimate the value of DBS's operations, the revenue approach was applied, For the purpose of the valuation, the discounted cash flow (DCF) method was applied based on the cash flow for the next five years. The cash flow forecast is based on the results of DBS for 2013 and the nine months ended September 30, 2014. In the valuation, it was assumed that the market share of DBS is expected to maintain stability throughout the years of the forecast. It was also assumed that a gradual erosion in the ARPU of DBS is expected in the short- and medium-term. The revenue forecast was prepared for five years, based on the forecast of the number of subscribers, average income and competition in the market. Cost of capital is 8.5% (after tax). It was also assumed that the perpetual growth rate will be 1%.
|
The valuation was based on assumptions regarding a participant in the relevant market that might acquire the Company's holdings in DBS and does not take into account the specific operational and tax synergies between the companies. The valuation is as at September 30, 2014.
|
|
3.2.7
|
Value of the Acquisition Transaction
|
|
|
A.
|
The fair value of the first additional contingent consideration of up to NIS 200 million, which will be paid in accordance with the tax synergy, was calculated according to the economic valuation based on the forecast for utilization of DBS's accumulated losses for tax purposes over 10 years, and using a discount rate of 8.5%. The fair value of the first additional consideration was estimated by the assessor as NIS 83 million.
|
|
|
B.
|
The fair value of the additional contingent consideration of up to NIS 170 million, which will be paid in accordance with the business results of DBS in the next three years, was calculated according to an economic valuation based on the anticipated future performance of DBS. The estimated fair value of this consideration is estimated as NIS18 million.
|
|
|
C.
|
The total acquisition cost of the consideration and additional contingent considerations of this transaction in the pro forma financial statements is NIS 781 million.
|
|
|
D.
|
The Company assumes that there is no change in the fair value of the contingent consideration in the periods.
|
Pro Forma Interim Consolidated Financial Statements as at September 30, 2014 (Unaudited)
|
|
3.2.8
|
The Company is currently preparing the allocation of the fair value for the tangible and intangible assets of DBS (PPA) through an external assessor. The PPA has not been completed. The PPA is attached to these statements. As at the approval date of this pro forma statement, the excess cost amounted to NIS 2,525 million. For the purpose of the pro forma statements, an excess cost that was determined provisionally will be allocated.
|
The main points of valuation are as follows:
|
|
A.
|
Customer relations were estimated at NIS 761 million. The valuation was based on the income approach, using the multi-period excess earning method. Under this approach, the value of the asset is derived from the present value of the cash flows that are expected to arise from it over the remaining economic life of the asset. Amortization will be based on the economic life of customer relations, which was set at 7 years, taking into account the customer churn rate, which includes the churn rate for an amortization period of seven years, as follows: Years 1-2 - 20%, years 3-4 - 15%, and years 5-7 - 10%.
|
|
|
B.
|
Brand value - estimated at NIS 329 million. The valuation was prepared in accordance with the relief from royalty method, according to a remaining economic life of 12 years.
|
|
|
C.
|
Debentures - excess value over cost was estimated at NIS 180 million due to a decrease in yield to maturity of each debenture series. The interest rates underlying the discounted cash flows are 2.3% -2.6%.
|
|
|
D.
|
Deferred tax asset - the value attributed to the tax asset is NIS 847 million, as follows:
|
| |
|
NIS million
|
|
|
Tax asset for cumulative losses
|
|
|
1,087 |
|
|
Tax reserve for attributed excess cost
|
|
|
(240 |
) |
| |
|
|
847 |
|
The Company believes that it will be able to take advantage of the tax asset for the accrued losses from the future profits of DBS and due to the possible merger between the companies.
|
|
E.
|
Goodwill - a value of NIS 768 million, constituting the difference between the consideration in the business combination and the fair value of the tangible assets, intangible assets and liabilities of DBS
|
10
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