Gilani's sale to private investor heralds new era

The owners of the Nakuru-based Gilani's Supermarket are set to loosen their grip on the homegrown retailer after selling a controlling stake to a private equity fund.

The Competition Authority of Kenya (CAK) announced the sale deal on Friday, marking a new era for the 48-year-old family-owned supermarket.

"The Competition Authority has authorised the proposed acquisition of control of the business and assets of Gilani's Supermarket Ltd by Oak Harbour Holdings Ltd," said CAK Director General Wang'ombe Kariuki in a gazette notice dated September 20.

It was not immediately clear how much Oak Harbour Holdings Ltd is set to inject into Gilani's Supermarket and the size of the controlling stake acquired.

Faiz Gilani, Gilani's chief executive had not responded to Weekend Business' queries on details of the deal by the time of going to press.

This is the latest major investment by a private equity fund into local retailers as they pursue growth and ringfence their fortunes amid changing market dynamics.

expansion agenda

Two other homegrown retailers Naivas, which was also founded in Nakuru alongside the collapsed Tuskys, and QuickMart, which rose to fill the void left by Uchumi and Nakumatt, have recently turned to deep-pocketed private equity (PE) firms for their expansion agenda.

Along with the cash flow retail businesses provide, which makes them attractive acquisitions for investment firms, Kenya's largely untapped retail space offers foreign PE funds huge returns, analysts say.

The Kenyan retail environment in townships and rural areas has long been dominated by small, mainly informal, business traders offering basic products to a low-income consumer market.

However, as the economy grows, consumers have progressed into the middle-income group, benefiting formal retail trade in urban areas where most upper- and middle-income consumer groups reside.

However, developments in the top end of the retail market and the fact that many traditional retailing areas are becoming saturated have left formal retailers to focus on market expansion strategies in emerging markets.

Backed by deep-pocketed PE funds, Naivas and QuickMart have grown to become two of Kenya's largest retail companies by sales and employment, avoiding the missteps of their predecessors for now.

The two retailers are taking the battle for customers to foreign-owned retail chain giant Carrefour, whose Kenya's sales surged 25.8 per cent to Sh32.9 billion (one billion Emirati dirhams) last year as it opened more branches and attracted more customers to its stores concentrated in Nairobi.

In June this year, the World Bank's International Finance Corporation (IFC) and French private fund Amethis sold an estimated 30 per cent stake in Naivas Supermarket to a cluster of investors led by Mauritian conglomerate IBL Group.

family's third generation

QuickMart has been expanding aggressively after a substantial investment from Africa-focused Adenia Partners.

The Gilani's deal marks a radical shift for the iconic retailer on Nakuru's Club Road, which has been serving customers since 1974.

With a floor space of 58,000 square feet, the supermarket is easily recognisable in the town, which was recently elevated to city status.

Under the motto "the highest quality, lowest prices guaranteed or money back," the supermarket chain seeks to personalise its relationship with its customers.

The store was started as a grocery store, then located along Pandit Nehru Road, 48 years ago by Ghulam Hussein.

Mr Ghulam would later be joined in the business by his two sons, Salim and Nazmi. The supermarket is currently under the leadership of the family's third generation.

The current CEO, Faiz Gilani, in an earlier interview with The Standard attributed the success of the business to keeping it under the management of the family.

shopping complex

"Almost every member of the family has worked in the supermarket. Even those who have gone ahead to establish their own businesses started by working for the family business," said Mr Faiz.

"We have all been encouraged to do this. The younger members of the family are taken through everything they need to know about the business way before they are allowed to take over."

What started as a single shop nearly five decades ago has since morphed into a shopping complex featuring a wholesale unit and a food restaurant division that offers Asian, English and African cuisine.

The business also has a real estate division that develops and lets commercial buildings in Nakuru town, including Tower 1, which at 14 floors is one of the tallest buildings in Nakuru city.