KENYA – Botswana’s retail chain Choppies on Monday said it had struck a deal to buy mid-tier Kenyan supermarket Ukwala for close to Sh1 billion, marking its entry into East Africa’s biggest economy.
Choppies said it had reached an agreement on May 29 to buy ten Ukwala stores located in Nairobi, Nakuru and Kisumu.
“Choppies Supermarket Kenya Limited (the local subsidiary) will buy the assets and the business name for a consideration of approximately $10 million (Sh990 million), subject to final due diligence and inventory valuation,” Choppies said in a regulatory filing at the Johannesburg Stock Exchange (JSE).
The deal, which is being financed through a mix of debt and equity, is still awaiting the Competition Authority of Kenya’s (CAK) authorisation and valuation of stocks held in the stores.
Half of the stores that are up for sale are located in Kisumu, three in Nairobi and the remaining two in Nakuru.
Sources privy to the deal, who cannot be named because the transaction is private, said that Ukwala shareholders had decided to exit the retail business with the sale of the chain’s ten stores to Choppies.
Choppies is entering the Kenyan market through a joint venture with the promoters of Export Trading Group, a Tanzania-based agri-business and logistics company.
Choppies has a 75 per cent stake in the Kenya subsidiary while the remaining 25 percent stake is held by Parin Bharatkumar Patel and Birju Pradipkumar Patel, the two directors of the Export Trading Group.
Choppies says in its filings that its entry into the Kenyan market is being driven by the expected strong growth in the general economy and low penetration in the formal retail sector.
“Kenya’s forecast GDP growth of 6.4 per cent CAGR (compounded annual growth rate) from 2014 to 2018 and an underpenetrated formal retail market provides Choppies with a compelling opportunity,” the Botswana retail chain says, adding that the formal retail market is expected to grow at a CAGR of 32.4 per cent from 2014 to 2019.
Broll Group chief executive Malcolm Horne said in a recent presentation that Kenya accounts for 19 per cent of the formal retail market in the sub-Saharan Africa, which is only second to South Africa, and disposable income that is 14 per cent above the continent’s average.
Kenya’s largest retail chain Nakumatt estimates that the formal retail market generates $2 billion (Sh198 billion) annually but has the potential to rake in $7 billion (Sh693 billion) per year, offering ample room for both local and international retailers to expand.
Choppies, which recently listed on the JSE, is joining the list of foreign retailers that have set their sights on Kenya’s fast-growing retail market that is so far dominated by homegrown brands.
Nakumatt and Tuskys are the country’s largest retail chain with 53 stores each. Uchumi, the only retail chain that is listed on the Nairobi Securities Exchange (NSE), has 40 branches while Naivas has 35 stores.
Botswana’s retail chain Choppies on Monday said it had struck a deal to buy mid-tier Kenyan supermarket Ukwala for close to Sh1 billion, marking its entry into East Africa’s biggest economy.
Choppies said it had reached an agreement on May 29 to buy ten Ukwala stores located in Nairobi, Nakuru and Kisumu.
“Choppies Supermarket Kenya Limited (the local subsidiary) will buy the assets and the business name for a consideration of approximately $10 million (Sh990 million), subject to final due diligence and inventory valuation,” Choppies said in a regulatory filing at the Johannesburg Stock Exchange (JSE).
The deal, which is being financed through a mix of debt and equity, is still awaiting the Competition Authority of Kenya’s (CAK) authorisation and valuation of stocks held in the stores.
Half of the stores that are up for sale are located in Kisumu, three in Nairobi and the remaining two in Nakuru.
Sources privy to the deal, who cannot be named because the transaction is private, said that Ukwala shareholders had decided to exit the retail business with the sale of the chain’s ten stores to Choppies.
Choppies is entering the Kenyan market through a joint venture with the promoters of Export Trading Group, a Tanzania-based agri-business and logistics company.
Choppies has a 75 per cent stake in the Kenya subsidiary while the remaining 25 percent stake is held by Parin Bharatkumar Patel and Birju Pradipkumar Patel, the two directors of the Export Trading Group.
Choppies says in its filings that its entry into the Kenyan market is being driven by the expected strong growth in the general economy and low penetration in the formal retail sector.
“Kenya’s forecast GDP growth of 6.4 per cent CAGR (compounded annual growth rate) from 2014 to 2018 and an underpenetrated formal retail market provides Choppies with a compelling opportunity,” the Botswana retail chain says, adding that the formal retail market is expected to grow at a CAGR of 32.4 per cent from 2014 to 2019.
Broll Group chief executive Malcolm Horne said in a recent presentation that Kenya accounts for 19 per cent of the formal retail market in the sub-Saharan Africa, which is only second to South Africa, and disposable income that is 14 per cent above the continent’s average.
Kenya’s largest retail chain Nakumatt estimates that the formal retail market generates $2 billion (Sh198 billion) annually but has the potential to rake in $7 billion (Sh693 billion) per year, offering ample room for both local and international retailers to expand.
Choppies, which recently listed on the JSE, is joining the list of foreign retailers that have set their sights on Kenya’s fast-growing retail market that is so far dominated by homegrown brands.
Nakumatt and Tuskys are the country’s largest retail chain with 53 stores each. Uchumi, the only retail chain that is listed on the Nairobi Securities Exchange (NSE), has 40 branches while Naivas has 35 stores.
