6.Acquisitions and business combinations

2018

Rocketbank

In July 2018, the Group obtained control over Rocketbank business, which does not represent a separate legal entity and will operate under the banking license of QIWI bank . Rocketbank is primarily focused on consumer financial services. The transaction was structured as an acquisition of assets combined with hiring of Rocketbank employees by the Group. The acquisition has been accounted for using the acquisition method. Pre-existing relationships between the Group and Rocketbank were not significant.

Consideration paid for Rocketbank business comprises only of cash in the amount of 183.

The fair value of the identifiable assets and liabilities as of the date of acquisition was:


		Fair value
Net assets acquired:
Property and equipment		113
Intangible assets		393
Deferred tax asset		3
Other liabilities		(419)
Total identifiable net assets at fair value		90

Consideration paid		183

Goodwill arising on acquisition		93

Goodwill in the amount of 93 relates to qualified workforce and is equal to the difference between fair value of net assets acquired in the business acquisition and the consideration paid. Goodwill was allocated to CGU Rocketbank. The Group determined the fair value of Rocketbank software, trademarks, client base and recognized as intangible assets as 393. The Group also obtained a liability regarding loyalty program of the acquired client base in the amount of 419. The Group received a compensation in the amount of 321 from seller for loyalty program liability transferred which was included as decrease of consideration paid. None of the goodwill recognised is expected to be deductible for income tax purposes.

Revenue of Rocketbank business from the acquisition date to the reporting date amounted to 180 and the net loss was 818. If Rocketbank business had been part of the Group from the beginning of the year, the Group’s revenue through to the reporting date would have amounted to 31,016 and net profit to 2,266.


Analysis of cash flows on acquisition for 2018:		Amount
Cash paid to the seller for non-current assets		(83)
Cash paid to the top-management of Rocketbank		(100)
Cash received from the seller		321
Total cash received upon business combination in the year 2018		138

Cash paid to the seller purchases of non-current assets of Rocketbank in the year 2017 was 321.

JSC Tochka

In June 2018, the Group, Bank Financial Corporation Otkritie and Tochka management signed a cooperation agreement to establish a new entity to develop the Tochka project together as a multi-banking platform. In July 2018 new entity JSC Tochka was created. Tochka is a digital banking service focused on offering a broad range of services to small and medium businesses. The capital structure of the new entity is as follows: Otkritie Bank has 50% + 1 share, QIWI - 40% and Tochka management has 10% - 1 share, while dividends and potential capital gains are distributed as follows: QIWI and Otkritie Bank to receive 45% each and 10% will be attributed to Tochka management. QIWI Group assesses its share in the new entity at 45% (according to its share in dividends and potential capital gains). Otkritie can impose its decisions by forcefully acquiring the shares of other partners in case of deadlocks, so the Group believes it only has significant influence over JSC Tochka. The Group recognizes this investment as an associate and has been accounted for it under the equity method. As part of the transaction Bank Financial Corporation Otkritie, Tochka management and the Group agreed to each contribute their assets to the new entity, including software, hardware and cash financing.

The structure of the Group contribution was the following:


Non-monetary assets		125
Monetary assets*		992
Total contribution		1,117

*No cash was paid during 2018.

No significant additional contributions are expected to be made in the next periods.

The fair value of assets contributed to JSC Tochka was:


		Fair value
Property and equipment		47
Intangible assets		88
Cash, accounts receivable and promissory notes		1,753
Total contributions		1,888
Group’s share (45%)		850
Contribution of the Group		1,117
Loss on set up of associate		(267)

The loss in the amount of 267 relates to disproportional contribution of assets by the Group as compared to other shareholders and is equal to the difference between the fair value of the obtained share in the JSC Tochka’s assets and Group contribution made.

2017

FLOCKTORY

On March 22, 2017, the Group acquired 82% stake in Flocktory Ltd, non-public company, operating in Russia and Spain. Flocktory Ltd operates through its subsidiaries Flocktory Spain S.L. and FreeAtLast LLC (Russia). The Flocktory’s business is primarily focused on the development of automated marketing solutions for the e-commerce, financial, media and travel industries, which are based on data collection and analysis and substantively represents SaaS platform for customer lifecycle management and personalization.

According to the shareholders’ agreement and Flocktory articles of association, decisions on relevant activities require unanimous consent of all shareholders. Thus, since the date of acquisition the Group has exercised a joint control over Flocktory Ltd and recognized it as a joint venture accounted for under equity method. Pre-existing relationships between the Group and Flocktory group were not significant.

QIWI entered into call and put option agreements with respect to the remaining 18% stake in Flocktory Ltd. Put option provides right to minority shareholders to sell their remaining shares in Flocktory to QIWI after the acquisition date. Put option becomes exercisable after one year from the acquisition date for 50% of minority shares, after year and a half from acquisition for 25% of minority shares and after two years form acquisition - remaining 25%.

The consideration was made by the following:


Cash consideration paid		794
Cash payable for Flocktory’s stock option plan cancelation*		37
Total purchase consideration transferred		831

*Based on the share purchase agreement (SPA) Qiwi plc is obliged to offer to employee stock option plan (ESOP) participants of Flocktory Ltd cash consideration for cancellation of 504 ESOP rights, 259 of which were cancelled at the date of acquisition (March 22, 2017), 120 offered for cancellation – at March 22, 2018, and 125 to be offered for cancellation at March 22, 2019.

The fair value of the identifiable assets and liabilities as of the date of acquisition was:


		Fair value
Net assets acquired:
Property and equipment		1
Intangible assets		720
Accounts receivable		26
Cash and cash equivalents		55
Trade and other payables		(21)
Other liabilities		(1)
Total identifiable net assets at fair value		780
Group’s share of net assets (82%)		639
Goodwill arising on acquisition		192

Goodwill related to the joint venture amounted to 192 and is included in the carrying amount of the investment in joint venture.