Programme is mutually exclusive of ongoing legal processes

Nakumatt workers arranging stocks at Nakumatt Village

Nakumatt Supermarket has gotten a lease of life after Tusker Mattresses announced it will restock some branches.

The retailer, which pledged to guarantee as much as Sh3 billion of debt and provide Sh650 million in additional capital to Nakumatt, said it will restock seven key branches in Nairobi and Mombasa.

Tuskys said it has restocked Nakumatt Village Hypermarket and Nakumatt Ukay Supermarket in Nairobi.

“As part of a strategic corporate nursing exercise, Tuskys has commenced the restocking of key Nakumatt branches. This exercise will be stepped up through the month of November and into the festive season with the support of key suppliers,” said Tusker Mattresses CEO Dan Githua.

Suppliers who have been talked into the deal, which will see Tuskys insure against non-payment include Unilever Kenya, Aquamist Water, Mjengo Limited, Bidco Africa, Jackys Limited, Proctor & Allan, Aspendos Dairies and Brookside Dairy.

Tuskys says other suppliers including Kevian Kenya owned by Association of Kenya Suppliers Chairman Kimani Rugendo have also agreed to the deal.

Mill Bakers, Gal Baking, DPL Festive and Kapa Oil Refineries will also resume supplies to Nakumatt shelves.

The retailer said the programme will be undertaken progressively and is mutually exclusive of the ongoing legal processes and is aimed at providing a life support platform for Nakumatt ahead of a proposed corporate merger; subject to regulatory approvals.

This move, however, poses serious implications on competition regulations especially since the Competition Authority of Kenya (CAK) says that no formal merger application has been filed.

When contacted for comment, CAK Director-General Wang’ombe Kariuki was surprised by the move saying he had no knowledge of the development.

“This kind of arrangement, from the face of it, is contrary to the law, and it can only be sanitised through grant of exemption, prior to its actualisation, by the authority. We wish to reiterate to the parties, that any initiative they are undertaking should be within the confines of the Competition Act, otherwise it may convolute and delay the regulatory approvals,” Mr Kariuki told Weekend Business.

“This is contrary to the CAK’s position, informed by the current challenges in the retail sector.” The Competition boss said that the two retailers have not filed any formal application for a merger and that the authority is only seeing the developments in media.

This is not the first time that Tuskys has run afoul of anti-trust laws. In 2014, Tusker Mattresses and Ukwala supermarkets were fined Sh5.3 million for engaging in anti-competitive practices.

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This was after Tuskys entered into an agreement in March 26, 2013 to have three branches of Ukwala Supermarkets managed by Tusker Mattresses for nine months.

Githua, however, said the retailer was only acting in the interest of the country’s retail sector through the ‘corporate nursing exercise’.

“As responsible players in the local formal retail sector, we are duty bound to facilitate the recovery of our market peer and we are glad that key suppliers have responded positively,” Mr Githua said.

Nakumatt and Tuskys share a history both having been founded in Nakuru within close-knit families and incidentally in support of each other.

Hasmukh Shah who started Nakuru Mattresses used to give Joram Kamau, who later founded Tuskys Supermarkets, goods on credit that he would sell at low prices. Hasmukh’s brother Mangalal Shah would later join him and take over when Hasmukh went to London. Mangalal and two sons Vimal and Atul who bought out Hasmukh would later expand Nakumatt to what it is currently.

Meanwhile, Mr Kamau who was busy building an empire around Tuskys, left his first shop to his brother Peter Mukuha Kago who transformed this into Naivas.

However, Yusuf Mugweru, the fourth born of seven siblings who own Tuskys Supermarkets, has opposed a proposed merger of the retailer with struggling Nakumatt.