Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 80 81 81 Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 80 Notes to the Financial Statements for the year ended 30 June 2017 Notes to the Financial Statements for the year ended 30 June 2017 The operating results for DNA Star Vegas Co., Ltd since acquisition are shown in Casino Operations â€“ Cambodia in note 3 above. As part of the agreement for the purchase, the vendor will manage the business for two full years following completion on 1 July 2015. The vendor also provided a guarantee that the EBITDA of the business would be not less than USD60 million per year for the two full years following the acquisition, being FY16 and FY17. If the target EBITDA of USD60 million is not met, the vendor will top up the shortfall in cash. However, if the target is met, the vendor will receive a management fee in return for the management services provided, in the sum of 25% of the NPAT of the business. No other management fee is payable for the management services. The amount of the management fee recognised in 2017 is AUD19,045,688 (2016: AUD20,492,174). Note 40. Business combinations Details of the acquisition and the values of assets acquired are as follows: Fair value $ Equity â€“ Casino licence â€“ at fair value 400,543,357 Buildings 90,768,920 Plant and equipment 1,447,911 Motor vehicles 354,580 Slot machines 1,261,336 Furniture and fittings 1,245,293 Cash 4,245,871 Trade and other payables (4,245,871) Net assets acquired 495,621,397 Gain on bargain purchase (55,165,316) Acquisition-date fair value of the total consideration transferred 440,456,080 Representing: Cash paid or payable to vendor 322,655,000 Donaco International Limited shares issued to vendor at agreed price 155,442,710 Share issue transaction costs (443,131) Adjustment to value of Donaco International Limited shares issued to vendor (41,363,075) Effect of exchange rate movements 4,164,576 440,456,080 Acquisition costs expensed to profit or loss 11,819,338 On 1 July 2015, the Group acquired Star Vegas Resort & Club as it is complementary to the leisure and entertainment activities of the Group, offers geographic and market diversification and significantly increases the revenue and earnings of the Group. Control was acquired by the Group acquiring 100% of the issued capital of DNA Star Vegas Co., Ltd, which is the owner of all the assets of the Star Vegas business, for agreed consideration of USD360 million (AUD471,841,466). This consideration consisted of USD240 million cash (AUD316,451,000) and AUD147,199,529 ordinary shares in the Company, with an agreed value of USD120 million (AUD154,999,579) and the Company credited AUD154,999,579 to share capital net of transaction costs. The Companyâ€™s stock closing price on 1 July 2015 was AUD0.775 (equivalent to approximately USD0.59698) and the fair value of the shares issued as consideration on the Completion Date was USD87,396,776 (AUD114,079,635). As a result of this variance between the fair value of the shares issued and the agreed price, AUD41,363,075 was debited to contributed equity to ensure the value of contributed equity was not recorded at an amount higher than its fair value. A further adjustment was made for movements in foreign exchange rates between the date of the agreement and the date the transaction occurred. Pursuant to a detailed valuation report and purchase price allocation report dated 20 June 2016 prepared by Colliers International Hong Kong Limited and its related parties Colliers International Thailand and Singapore, the fair value of the business acquired by Donaco was USD368.1 million (AUD495,621,397). The difference between the fair value of the business acquired and fair value of the purchase consideration of USD327.9 million (AUD440,456,080) gives rise to a bargain purchase amounting to USD40.2 million (AUD55,165,316). The bargain purchase of AUD55,165,316 is recognised as a gain in the Companyâ€™s income statement in 2016 in accordance with the Accounting Standard AASB 3 Business Combinations.