Nakumatt Tanzania sells 51pc stake in recapitalisation plan

Dar es Salaam. Nakumatt Tanzania is selling a 51 per cent stake as the retail chain seeks additional capital to tweak its operations amid increasing debts regionally.

This comes two years after the Kenyan retailer acquired Shoprite shops in Tanzania in a deal that was valued at Sh76 billion.

Though the company – which owns three retail outlets (one in Arusha and two in Dar es Salaam - remains tightlipped on actual details of the sale, information published by the Fair Competition Commission (FCC) show that the buyer is a company known as Ascent Investment Limited.

The latter has already written to the FCC about the intended acquisition and the commission is investigating the matter before approving it.

“FCC is currently investigating the acquisition in line with the provisions of the Fair Competition Act 8 of 2003 and the Fair Competition Commission Procedure Rules, 2013,” FCC said in a September 22, 2016 public notice.

The competition commission gave interested parties a two-week ultimatum to air their views that would help it in making an informed decision.

“Pursuant to Rule 49 of the FCC Procedure Rules, 2013, parties (both legal or natural) who deem themselves as having sufficient interest in the merger or if the merger is not objected to, it will have or is likely to have material effect on their interests, are hereby notified to register their interest (if any) or file any information that will assist the FCC in reaching a just and reasonable decision,” the statement reads.

This is happening at a time when the Kenyan retail chain is facing an increase in its gross debt in Kenya and in Uganda, a situation that piles pressure on operations and resulting in long payment delays to suppliers.

As a result, the family-owned company – Nakumatt Holdings - is now offloading a cool 25 per cent stake. The Nakumatt Holdings business development director, Mr Neel Shah was last week quoted in Kenya’s Business Daily as saying that the firm’s owners were on course to finalising the share sale — which has been in the works since 2009 — in a matter of weeks.

“Barring any eventualities, this deal will be closed in a few weeks with full disclosure once done,” Neel Shah, the business development director at Nakumatt Holdings, told Business Daily in an interview. The executive is a son of Atul Shah, Nakumatt’s managing director.

The family-owned business declined to disclose the identity of the suitors, citing “client confidentiality,” but promised to publicly announce details once the deal is closed.

Nakumatt’s gross debt more than tripled to Ksh15 billion (about Tsh300 billion) in February 2015 from Sh4.2 billion (about Tsh84 billion) in 2011.

“This equity fund will help retire existing funding tools, including bank loans and related debts,” Mr Shah told Business Daily.

The planned sale of a stake to the strategic investor was mooted in 2009 when a consortium of investors led by London-based private equity fund Satya Capital — associated with Sudanese billionaire Mo Ibrahim — expressed interest but the deal fell through.

Nakumatt’s decision to tie-up with a strategic investor means the retail chain has abandoned earlier plans to raise capital through an initial public offering at the Nairobi Securities Exchange.

In Uganda, Nakumatt has had its stalls running empty at its several outlets as several suppliers have stopped placing products on the shelves of retail supermarket operator until payments are made for previous supplies.

And on Thursday last week, Nakumatt Holdings issued a statement in which admitted that it was in the red and was seeking a rescue.

“Like any other business operating in this market, Nakumatt Holdings has faced a number of unforeseen business challenges. These challenges range from a depressed economy, higher operating costs and extraneous factors including risk management due to prevailing security threats, among others,” the statement signed by Managing Director Atul Shah reads in part.