Background: AR Luxury is currently operating in SaudiArabia since the 90s through a franchisee agreement with a
Question:
Background: AR Luxury is currently operating in SaudiArabia since the 90s through a franchisee agreement with a local Partner. The Partner is currently managing 5 doors, in two different Malls.
The project: The aim of AR Luxury is to run directly as a retailer the business, and to expand the network. The deal:
- A NewCo will be created, owned 75% by AR Luxury and 25% by the local Partner. The share capital amount required by law is equivalent to 5.3 mln euro. - To obtain the 75% majority shareholding AR Luxury agreed with the Partner: 1) Merchandise: the NewCo will buy the current seasonal stock (at the handover date) at the duty paid landed cost*. The estimated cash out is 5.5 mln euro. 2) Fixed assets: the NewCo will buy from the Partner the Net Book Value of the currently operated doors, for 2.1 mln euro 3) Goodwill: AR Luxury will pay a goodwill to the Partner agreed in maximum 5 mln euro 4) Call Option: at the end of 2025,AR Luxury will have the right to buy the remaining 25% shareholding from the Partner, at fair market value. * The landed cost includes the original price of the product, transportation fees, customs, duties, taxes, tariffs, insurance, currency conversion, crating, handling and payment fees. All of these individual costs are part of the value of the received goods.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill