Fund offers Nakumatt Sh8b for 25pc stake in retail chain

Nairobi: Leading retailer, Nakumatt Holdings, has received a Sh7.7 billion ($75 million) offer for 25 per cent stake from a foreign fund.

The retailer said the process is yet to be completed but reports indicate that the company is likely to close the deal ending the supermarket chain's long search for a strategic investor.

“We are already at final stages with the investor. We are just waiting for the money to come,” Nakumatt Managing Director Atul Shah told Reuters.

The stake may include businessman John Harun Mwau’s 7.7 per cent minority stake in the company after he reportedly sold his share ahead of the search for a strategic investor.

The deal will be able to cover half of Nakumatt’s spiralling debt problem that hit record levels last year forcing South African ratings firm, Global Credit Rating (GCR), to downgrade the retailer’s status.

According to GCR, Nakumatt’s total debt burden has grown rapidly over the last five years from Sh4.7 billion in 2012 to Sh18 billion last year.

GCR said the huge debt had ‘placed undue pressure on the group’s gearing and liquidity position, with new funding limits having largely been reached’.

Nakumatt has been on an expansion binge across the region, clocking 63 retail outlets with six in Tanzania, four in Rwanda and 10 in Uganda.

The retailers expansion has however been checked as costs built up for outlets that had not broken even and debt repayment straining its balance sheet to place the supermarket chain in a tight cash position.

Nakumatt has since revised its growth plan putting up part of its Tanzanian holding for sale to ease its cash problems that has seen it run into conflict with suppliers.

No offer yet

Wednesday, the firm said the Tanzanian firm Quality Group Limited (QGL), which expressed interest to buy a majority stake (51 per cent) in Nakumatt Tanzania, has not followed up the offer.

“We received an offer like any other we considered...we are still waiting for the discussions but as at now, the Tanzanian stake has not been sold,” the retailers spokesperson said.

Nakumatt ceding space to a foreign investor is an indication of the sunset days of the family owned retailers as Kenya paves way for an expanding global appetite for East Africa’s retail space. Tuskys and Naivas remain the two family-owned retail chains in the face of stiff competition from Botswana retailer, Choppies, which bought out Ukwala in its expansion into Zambia and Kenya.

French giant retailer Carrefour and America’s Walmart, through Massmart, its South African subsidiary, have set a footprint in the country.

Nakumatt remains on the lead in terms of network presence followed by Tuskys, Naivas, listed retailer Uchumi, Choppies, Carrefour and Massmart all competing for space in sprouting malls. Mid-tier supermarkets like Eastmatt, Tumaini and Chandarana are also growing a niche market, especially in residential areas.