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ACQUISITIONS AND DISPOSALS | 12 Months Ended
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Dec. 31, 2018
ACQUISITIONS AND DISPOSALS [Abstract] |
ACQUISITIONS AND DISPOSALS |
| 4. | ACQUISITIONS AND DISPOSALS
For the year ended December 31, 2016 Acquisition of Beijing Century Friendship and BPMC On December 18, 2007, the Group entered into a framework agreement with Chang'an Information Industry (Group) Co., Ltd. (“Chang’an Information”) and China-Japan Friendship Hospital to set up Beijing Proton Medical Center Co., Ltd. (“BPMC”), a proton treatment center in Beijing. Pursuant to the framework agreement, the Group paid a deposit of RMB29,600 to Beijing Century Friendship Science & Technology Development Co., Ltd. (“Beijing Century Friendship”), an entity set up by Chang'an Information, to be used for the construction of the proton treatment center. BPMC was legally set up on July 6, 2012. On May 24, 2015, the Group entered into a transfer agreement with Chang’an Information to acquire 100% equity interest of Beijing Century Friendship at a cash consideration of RMB70,000. The closing of the acquisition of Beijing Century Friendship is subject to the condition that Beijing Century Friendship obtains 55% interest of BPMC. The Group fully paid the consideration of RMB70,000 and paid an additional RMB1,000 for the future operations of BPMC as of December 31, 2015. The acquisition was completed on January 27, 2016 when Beijing Century Friendship obtained 55% equity interest in BPMC, at a total consideration of RMB100,600. Upon the completion, the Group holds 100% equity interests of Beijing Century Friendship and indirectly holds 80% equity interest of BPMC. The transaction did not meet the definition of a business acquisition and was accounted for as an asset acquisition under ASC 805. The purpose of the acquisition is to obtain the license to operate the proton treatment center from the Ministry of Health of China upon the completion of construction of the proton treatment center in BPMC. The major asset acquired was the prepayment for operating license of RMB99,851, with other insignificant financial assets acquired and financial liabilities assumed. For the year ended December 31, 2017 Disposal of Beijing Century Friendship and BPMC On April 6, 2017, Guofu Huimei, an equity method investee of the Group, made a capital injection of RMB388,500 (note 1) in cash to Beijing Century Friendship to obtain 78.31% of its equity interest. Before the capital injection, Beijing Century Friendship was a wholly owned subsidiary of the Group and held 55% equity interest in BPMC. Upon the capital injection from Guofu Huimei, the Group’s effective interest in Beijing Century Friendship was diluted to 42.1% with a direct interest of 21.69% held by two subsidiaries of the Company and an indirect interest of 20.41% through Guofu Huimei. The Group lost control in Beijing Century Friendship and BPMC on April 6, 2017 and accounted for it as a deemed disposal and recognized a gain of RMB58,854 in accordance with ASC 810-10-40. The gain was measured as the difference between the fair value of the retained noncontrolling interest at the date of deconsolidation and the carrying amount of the former subsidiaries’ net assets. The direct interest held in Beijing Century Friendship and BPMC by the Group was accounted for as equity method investment (note 15). The carrying value of assets and liabilities of Beijing Century Friendship and BPMC as of April 6, 2017 (the date of disposal), are as follows:
|  | RMB |
Current assets |  |  | 18,035 |
Deposit for operating license |  |  | 109,581 |
Other non-current assets |  |  | 45 |
Current liabilities |  |  | (35,152 | )
Noncontrolling interests |  |  | (8 | )
Net assets disposed |  |  | 92,501 |
The Group, with the assistance of an independent third-party valuation firm, determined the fair value of the retained noncontrolling interest of Beijing Century Friendship and BPMC based on a discounted cash flow model. As a result of the disposal, the Group recognized a gain on the deemed disposal of Beijing Century Friendship and BPMC as summarized below:
|  | RMB |
Fair value of retained noncontrolling investment |  |  | 151,355 |
Disposition of net assets |  |  | 92,501 |
Gain on disposal of Beijing Century Friendship and BPMC |  |  | 58,854 |
Disposal of Allcure Medical Holdings Ltd. (BVI) (“Allcure BVI”) On October 18, 2017, the Group entered into a share transfer agreement with Bluestone Holdings Limited (“Bluestone”), a related party controlled by a director of the Company, to transfer 100% interest of a subsidiary, Allcure BVI with its subsidiary Beijing Allcure Medical Technology Ltd. at consideration of RMB3. A disposal gains of RMB59 was recognized in consolidated financial statements of comprehensive loss for the year ended December 31, 2017. For the year ended December 31, 2018 Acquisition of Guofu Huimei, Beijing Century Friendship, BPMC and CMCC In June 2018, MHM, a subsidiary of the Group entered into separate agreements with Guofu Huimei, an equity investee of the Group, to purchase all its 78.31% equity interests in Beijing Century Friendship which holds 55% equity interest of BPMC and 54.8% equity interests of CMCC at consideration of RMB 388,500 and RMB182,100 respectively. The consideration was paid in June 2018 and July 2018 and related commercial registration was completed on July 26, 2018 and October 8, 2018 respectively. Meanwhile, ZR Guofu and Guofu Huimei reached an agreement, according to which ZR Guofu will withdraw its original investments in Guofu Huimei, amounting to RMB746,000, then the Group became the sole shareholder of Guofu Huimei after the investment withdrawn in July 2018 and commercial registration completed on September 3, 2018. The Group previously held 21.69% equity interest in Beijing Century Friendship, 25% directly interest in BPMC, 35.2% equity interest of CMCC and 26.06% equity interests of Guofu Huimei prior to the transactions mentioned above. Upon the completion, the Group will hold 100% equity interest of Beijing century Friendship, 55% equity interests of BPMC and 90% equity interest of CMCC through MHM, 25% equity interests of BPMC through King Cheers and 100% equity interests of Guofu Huimei through Shanghai Medstar and BJCMT. The Group account for it as a single transaction and obtained control of Guofu Huimei, Beijing Century Friendship BPMC and CMCC on October 8, 2018. The fair value of the gross assets acquired during the acquisition is not concentrated in a single identifiable asset or a group of similar identifiable assets and it meets the definition of a business and was accounted for as business acquisition under ASC 805. The Company has completed the valuations necessary, with the assistance of an independent third-party valuation firm, to assess the fair values of the tangible and intangible assets acquired, liabilities assumed and the noncontrolling interest, resulting a goodwill was recognized as of the acquisition date. The valuation utilized generally accepted valuation methodologies including the income, market and cost approaches. The following table summarizes the estimated fair values of the assets acquired, liabilities assumed and the noncontrolling interest as of October 8, 2018, the date of acquisition:
|  | RMB |
Current assets |  |  | 47,827 |
Property, plant and equipment, net |  |  | 17,297 |
Intangible assets* |  |  | 454,013 |
Long term investments |  |  | 300,504 |
Other non-current assets |  |  | 108,322 |
Deferred tax assets |  |  | 185 |
Goodwill |  |  | 165,171 |
Current liabilities |  |  | (61,454 | )
Non-current liability |  |  | (165,436 | )
Deferred tax liabilities |  |  | (113,340 | )
Non-controlling interests |  |  | (99,480 | )
Total |  |  | 653,609 |
|  | RMB |
Total purchase price is comprised of: |  |  |  |
- Cash consideration |  |  | 570,600 |
- fair value of previously hold equity interests |  |  | 520,625 |
- effective extinguishment of loans from the acquisition |  |  | (437,616 | )
Total |  |  | 653,609 |
| * | Acquired amortizable intangible assets primarily include two operating licenses of hospitals of RMB164,440 and RMB272,910 respectively and a favorable lease contract of RMB16,010. The operating license have estimated amortization periods of 20 years and the favorable lease contract have estimated amortization periods of 12 years
The following unaudited supplemental pro forma consolidated financial information for the years ended December 31, 2017 and 2018 are presented as if the acquisition had occurred at the beginning of the periods presented. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what the combined company’s operating results would have been had the acquisition taken place on January 1, 2017, nor do they project the future results of operations of the combined company. The actual results of operations of the combined company may differ significantly from the pro forma adjustments reflected here due to many factors.
|  | Unaudited Supplemental Pro Forma |
|  | For the year ended December 31, |
|  | 2017 |  |  | 2018 |  |  | 2018 |
|  | RMB |  |  | RMB |  |  | US$ |
Net revenues |  |  | 4,569 |  |  |  | 12,056 |  |  |  | 1,753 |
Net loss |  |  | (70,018 | ) |  |  | (63,159 | ) |  |  | (9,186 | )
The results of operations of Guofu Huimei, Beijing Century Friendship, BPMC and CMCC since the acquisition date included in the consolidated statement of comprehensive loss of the Company for the year ended December 31, 2018 is as follows:
|  | For the Years Ended December 31, |
|  | 2018 |
|  | RMB |  |  | US$ |
Net revenues |  |  | 4,827 |  |  |  | 702 |
Net loss |  |  | (5,639 | ) |  |  | (820 | )
The aggregate purchase price allocation includes acquisition of certain acquirees, which were equity method investees of the Company prior to the acquisitions. In aggregate, a re-measurement gain relating to the Company’s pre-existing equity interest of RMB28,846 was recognized in other income in the consolidated income statement for the year ended December 31, 2018. The Company applied the equity method of accounting by recognizing its share of the profit or loss in these equity method investees up to their respective dates of acquisition. The fair value of the previously held equity interests was estimated based on the purchase price per share as of the acquisition date. The Company expects the acquisition to support its strategy to facilitate the Group’s long-term goal to develop specialized hospital chains in cancer / oncology treatment services including diagnostic imaging, radiation oncology treatment and medical oncology treatment. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of proton hospitals, the assembled workforce and their knowledge and experience in the PRC. The goodwill recognized was not expected to be deductible for income tax purpose. Disposal of CMS Radiotherapy Holdings Limited (“CMS (USA)” ) On January 25, 2016, Ascendium entered into an agreement to transfer 100% interest of CMS (USA), a BVI company previously incorporated by Ascendium in October 2013, to Beijing Allcure Medical Technology Co., Ltd. (“JWYK”), a related party, with consideration of RMB8,594(US$1,250). The purchase consideration was paid on November 10, 2016, while the transfer registration was completed on May 3, 2018. A gain on disposal of subsidiary of RMB3,341 (US$486) was recognized in consolidated financial statements of comprehensive loss for the year ended December 31, 2018.

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