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Fawaz A. Alhokair Co. announces arrangement to be allocated 8.9% of Egyptian Company for Real Estate Development’s share capital in consideration of outstanding receivables (related party transaction).

CENOMI RETAIL 4240 3.92% 20.16 0.76
Element List Explanation
Introduction Fawaz A. Alhokair Co. (“Alhokair”) announces that the Board of Directors has approved an arrangement on Tuesday 17 Shaʻban 1442H corresponding to 30 March 2021 to allocate 8.9% of the share capital of Egyptian Company for Real Estate Development (“ECRED”), an affiliate, to the benefit of Retail Group Egypt Co. (“the Company”), a subsidiary, in consideration of outstanding receivables of EGP 354.7 million (SAR 84.4 million).

The agreement has been signed by all parties on Thursday 26 Shaʻban 1442H corresponding to 08 April 2021

Transaction Details In consideration of outstanding receivables of EGP 354.7 million (SAR 84.4 million) due to the Company from ECRED, the Company will be allocated 8.9% of the share capital of ECRED, based on a fair market valuation of ECRED of EGP 3,983 million (SAR 948 million) conducted by an external financial advisor.

It is worth noting that the external financial advisor had provided a valuation range for ECRED ranging from EGP 3,891.2 million (SAR 926 million) and EGP 4,212.6 million (SAR 1,002.6 million) and the Company elected the lower end of the range at EGP 3,983 million (SAR 948 million).

As such, the receivables will be reclassified as an investment on the Alhokair’s consolidated balance sheet, providing the opportunity for future capital appreciation. The arrangement is a related party transaction, whereby three of Alhokair’s largest shareholders, two of which are Board Members, are also shareholders and board members in ECRED.

Transaction Value EGP 354,727,005 (SAR 84,428,200).
Transaction Terms The transaction has been approved by the Board of Directors on Tuesday 17 Shaʻban 1442H corresponding to 30 March 2021 and is subject to shareholders approval at the Alhokair’s next Ordinary General Assembly meeting.
Parties of the Transaction 1) Fawaz A. Alhokair Co.;

2) Retail Group Egypt Co.;

3) Egyptian Company for Real Estate Development;

4) Fawaz Abdulaziz Alhokair;

5) Abdulmajid Abdulaziz Alhokair; and

6) Salman Abdulaziz Alhokair.

Transaction Funding Method The transaction does not require funding, being a balance sheet reclassification whereby Alhokair will reclassify the receivables due from ECRED as an equity investment in ECRED.
Transaction Execution Date 2021-04-08 Corresponding to 1442-08-26
Description of the Business of the Asset forming the Subject Matter of the Transaction ECRED was founded in 2007 and is headquartered in Egypt.

It was established to own properties, develop and operate shopping centers, malls, and residential units in Egypt.

ECRED owns the Mall of Arabia, which is located in 6th of October City in Egypt with a total area of 621k sqm tenanted by over 500 shops including restaurants, cinema showrooms, kids play areas, and retail shopping stores. The mall is currently in its second expansion phase, which will include IKEA as an anchor tenant.

ECRED is also developing AEON Towers in West Cairo, which are serviced luxurious high-rise residential buildings.

Financial Statements for the Last Three Years of the Asset forming the Subject Matter of the Transaction Revenue:

2018: EGP 535 million (SAR 127.3 million)

2019: EGP 538 million (SAR 128.1 million)

2020: EGP 694 million (SAR 165.2 million)

Net income (Loss):

2018: EGP (86) million (SAR (20.5) million)

2019: EGP 81 million (SAR 19.3 million)

2020: EGP 173 million (SAR 41.2 million)

Transaction reasons The purpose of the transaction is to reclassify receivables due from ECRED to an equity investment by Alhokair in ECRED’s share capital, thereby providing Alhokair and its shareholders with the opportunity for future capital appreciation.
Expected Impact of the Transaction on the Company and Its Operations The balance sheet reclassification will not impact Alhokair’s operations, but will be reflected in the consolidated financial statements as at 31 March 2021 as an investment.

The investment provides the opportunity for Alhokair to realise future value from its holdings in ECRED, while at the same time materially reducing its related party receivables.

Related Parties 1. Fawaz Abdulaziz Alhokair (Owner of 6.14% stake in Alhokair and Chairman of the Board of Alhokair – owner of 34% stake in ECRED and Board Member of ECRED).

2. Abdulmajid Abdulaziz Alhokair (Owner of 7.0% stake in Alhokair and Board Member of Alhokair – owner of 33% stake in ECRED and Board Member of ECRED).

3. Salman Abdulaziz Alhokair (Owner of 7.0% stake in Alhokair – owner of 33% stake in ECRED and Board Member of ECRED).

Additional Information The Company’s investment in ECRED will be registered through a contractual arrangement, where the ownership will be registered under the name of the current shareholders for the benefit of and on behalf of the Company until the ownership becomes registered under the Company’s name. The Company will reserve all the rights to benefit from the shares. The current shareholders are related parties, namely Fawaz Abdulaziz Alhokair and Abdulmajid Abdulaziz Alhokair, and Salman Abdulaziz Alhokair, for which they will own 3.0%, 2.9%, and 2.9% of the ECRED shares respectively on behalf of the Company.

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