Walmart 2007 Annual Report Download - page 53

Wal-Mart 2007 Annual Report 51
6Acquisitions and Disposals
Acquisitions
During December 2005, the Company purchased an additional interest
in The Seiyu, Ltd. (“Seiyu”), for approximately $570 million, bringing the
Company’s total investment in Seiyu, including adjustments arising
from the equity method of accounting, to $1.2 billion. Seiyu is a retailer
in Japan, that currently operates 392 stores selling apparel, general
merchandise, food and certain services. Following this additional pur-
chase, the Company owned approximately 53.3% of Seiyu common
shares. Beginning on the date of the controlling interest purchase, the
Company began consolidating Seiyu as a majority-owned subsidiary
using a December 31  scal year-end. Seiyu’s results of operations from
the date of consolidation through January 31, 2007, were not material
to the Company. As a result of the initial consolidation of Seiyu, total
assets and liabilities of $6.7 billion and $5.6 billion, respectively, were
recorded in our Consolidated Financial Statements. Goodwill recorded
in the consolidation amounted to approximately $1.5 billion.
The minority interest in Seiyu is represented, in part, by shares of
Seiyu’s preferred stock that are convertible into shares of Seiyu com-
mon stock. If the minority holder of Seiyu’s preferred stock proposes
to sell or convert its shares of preferred stock, the Company has the
right to purchase those shares at a predetermined price. In June
2006, the Company purchased certain of the minority holder’s Seiyu
preferred shares for approximately $45 million. None of the Seiyu
preferred shares owned by the Company, including the preferred
shares purchased in June, have been converted into Seiyu common
shares. If converted, the Company would own approximately 55.3%
of Seiyu’s common shares.
Through a warrant exercisable through December 2007, the Company
can contribute approximately ¥154.6 billion for approximately 539 mil-
lion additional common shares of Seiyu stock. If the warrant is exercised,
the Company would own approximately 71% of the common
shares of Seiyu. These percentages assume no conversion of Seiyu’s
preferred stock into common shares and no other issuances of
Seiyu common shares.
In December 2005, the Company completed the purchase of Sonae
Distribuição Brasil S.A. (“Sonae”), a retail operation in Southern Brazil,
that currently operates 139 hypermarkets, supermarkets and ware-
house units. The purchase price was approximately $720 million
including transaction costs. Assets recorded in the acquisition of
Sonae were $1.3 billion and liabilities assumed were $566 million. As
a result of the Sonae acquisition, we recorded goodwill of $305 million
and other identi able intangible assets of $89 million. Sonae’s results
of operations, which were not material to the Company, are included
in our Consolidated Financial Statements following the date of acqui-
sition through January 31, 2007, using a December 31  scal year-end.
In September 2005, the Company acquired a 33.3% interest in CARHCO,
a retailer that currently operates 413 supermarkets and other stores in
Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The pur-
chase price was approximately $318 million, including transaction
costs. In  scal 2006, the Company accounted for its investment in
CARHCO under the equity method. Concurrent with the purchase of
the investment in CARHCO, the Company entered into an agreement
to purchase an additional 17.7% of CARHCO in the  rst quarter of  s-
cal 2007 and an option agreement that will allow the Company to
purchase up to an additional 24% beginning in September 2010 from
the shareholders of CARHCO. To the extent that the Company does
not exercise its option to purchase the additional 24% of CARHCO,
the minority shareholders will have certain put rights that could
require the Company to purchase the additional 24% of CARHCO
after September 2012.
In February 2006, the Company purchased the additional 17.7% of
CARHCO for a purchase price of approximately $212 million. Following
this purchase, the Company began consolidating CARHCO as a
majority-owned subsidiary using a December 31 fiscal year-end.
CARHCO’s results of operations from the date of consolidation through
January 31, 2007, were not material to the Company. As a result of
the consolidation of CARHCO, total assets and liabilities of $1.3 billion
and $576 million, respectively, were recorded in our Consolidated
Financial Statements. Goodwill and identi able intangible assets
recorded in the consolidation amounted to approximately $412 mil-
lion and $97 million, respectively. During  scal 2007, CARHCO was
renamed Wal-Mart Central America.
Disposals
During  scal 2007, the Company entered into de nitive agreements
to dispose of our operations in South Korea and Germany, which
were included in our International segment. Consequently, the net
losses related to these operations, our gain on the disposition of our
South Korea operations, and the loss on the disposition of our German
operations are presented as discontinued operations in our Consolidated
Statements of Income and our Consolidated Statements of Cash Flows
for all periods presented. Additionally, the asset groups disposed of
are reported as assets and liabilities of discontinued operations in our
Consolidated Balance Sheets as of January 31, 2006.
In May 2006, the Company announced the sale of its retail business in
South Korea, which operated 16 stores, to Shinsegae Co., Ltd., for Won
825 billion, subject to certain closing adjustments. This transaction
was approved by the Korea Fair Trade Commission in September 2006
and closed during the third quarter of fiscal 2007. The Company
recorded a pretax gain on the sale of $103 million, and tax expense
of $63 million during fiscal 2007. In determining the gain on the
disposition of our South Korean operations, the Company allocated
$206 million of goodwill from the reporting unit. The transaction con-
tinues to be subject to certain indemni cation obligations. In the event
there are any additional charges associated with this divestiture, we will
record and report such amounts through discontinued operations in
future periods.
Notes to Consolidated Financial Statements