National Company for Learning and Education (NCLE) signed today, Oct. 28, an agreement to buy 100% of Refan Company for Operation & Maintenance Limited (Refan) for a total of SAR 946,000.
The purchase price will be paid in cash to Refan’s owners upon signing the amended article of association as per the applicable regulations. The transaction will be funded from NCLE’s internal resources.
NCLE added that it expects a positive impact on reduction in operational expenses, related to the current operation and maintenance contract with Refan, which will be reflected on its financial results throughout the fiscal year ending Aug. 31, 2021.
Refan was valuated using different methods such as the discounted cash flow (DCF), P/E and EBITDA multiples methods.
The company said in a bourse statement that the agreement contains a number of warrants and representations by the sellers, regarding the commercial aspects such as the information accuracy of Refan’s accounts, financial statements and the validity of asset ownership. Other warranties include Refan’s liabilities and its employees as well as the indemnification of any unrecorded liabilities or any differences in Zakat obligations for the period prior to closing date.
The agreement is also subject to a number of conditions precedent that must be fulfilled by the sellers during 180 days from the date of signing the agreement, including obtaining the necessary regulatory approvals.
In addition, the agreement includes the sellers’ obligation to maintain Refan’s commercial operation as usual and to sustain all contractual relationships with its suppliers and customers as well as its responsibility towards its employees and the compliance with all the regulations in Saudi Arabia.
The agreement also includes restrictions to the sellers in carrying specific tasks and work specified in the agreement and its annexes prior to receiving written consent of the buyer.
Refan recorded in its audited financial statements a revenue of SAR 1.6 million, SAR 4.4 million, and SAR 6.6 million in 2017, 2018 and 2019, respectively. The company also recorded a net profit (loss) of SAR 65,000, SAR -234,000 and SAR 228,000 on 2017, 2018 and 2019 respectively.
Upon completion, the deal will result in a reduction in operational expenses related to the current operation and maintenance contract with Refan, which is variable based on the number of workers provided by Refan for NCLE.
In addition, the transaction is part of the company’s strategy is to establish a new segment specialized in providing educational support services, given the expansion in opening new schools, which include services for cleaning, maintenance, transportation, canteens and other educational supporting services.
Khalid Mohammed Al-Khudair, chairman of board of directors at NCLE, Mohammed Khalid Al-Khudair, CEO of NCLE, and major shareholders in NCLE, including Mohammed Al-Khudair Real Estate Development Co. and Muhammed Ibrahim Al-Khudair Endowment, are related parties to the transaction.
The related parties collectively own a 62.1% stake in NCLE and indirectly own 70.8% of Refan.
The signing of the agreement does not guarantee that the transaction is closed, since the closing is subject to obtaining the General Authority for Competition’s approval.
NCLE will announce closing the transaction or any major updates in due time.
According to data compiled by Argaam, NCLE signed, on Sept. 3, a non-binding memorandum of understanding (MoU) with Aaj Real Estate Investments Company and Yamami Holdings Company, owners of Refan). On completion of the deal, Refan Company will be 100% owned by NCLE.
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