On March 2, 2020, Filling and Packing Materials Manufacturing Co. (FIPCO) signed an agreement to acquire Eirad Investment Co.’s stake in its subsidiary FPC Industries Co.
|Deal Value||Method of Finance||Type||Status|
|Filing and Packing Materials Manufacturing Co. - FIPCO|
|Argaam Sector||Packaging and containers|
|*Market Cap (Million SAR)||691.15|
|FPC Industries Co. - FPC|
|*Market Cap (Million SAR)||-|
|Expected date for Completion||02-09-2020|
Under the acquisition agreement, Eirad Investment Co. will waive its 20% stake in FPC in return of 20% of net profit, as per the audited annual financial statements for a period of 10 years until Dec. 31, 2029.
* FIPCO owns 80% of FPC, which requires quarterly consolidated financial statements of FIPCO, unlike FPC, a limited liability company with a longer grace period for reporting financials. The acquisition will help FIPCO consolidate taxes and Zakat expenses, as the above-mentioned longer grace period might not enable FIPCO to issue its consolidated financials within the regulatory periods.
Moreover, the existence of a partner hinders the consolidation of tax and Zakat expenses, which raises the company’s total expenses.
The consolidation of some units and expenses will increase the management efficiency, boost the decision-making process and limit expenses.
* FPC Industries was set up in January 2017 as a limited liability company. The company was a joint venture between FIPCO and Eirad Investment Co. to manufacture industrial fabrics, including high density PVC coated fabrics, silicone and teflon fabrics (CTF). FIPCO owned 80% stake in the company, while the remaining 20% stake was owned by Eirad Investment Co.
* FIPCO established a 10-year non-competition condition to ensure that Eirad Investment will not, directly or indirectly, run a competitive business over the agreement term.