KENYA – Retail giant Nakumatt is set to sell a 51 per cent stake in its Tanzanian unit for an undisclosed amount as it follows through a recently announced plan to retire its debt load.
Nakumatt, which is Kenya’s largest retailer with 61 stores across East Africa, is reported to have written to Tanzania’s Fair Competition Commission (FCC) about the intended sale.
The Tanzanian anti-trust watchdog was quoted by Tanzania’s Citizen newspaper on Thursday saying it was reviewing the transaction before approving it.
The publication identified the buyer as a company known as Ascent Investment Limited.
“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 was quoted as saying.
Nakumatt expanded its presence in Tanzania two years ago after acquiring three stores belonging to South Africa’s Shoprite in a deal valued at Sh4 billion.
The acquisition gave Nakumatt a bigger presence in Tanzania where it debuted in December 2011 with the 34,000-square feet Nakumatt Moshi outlet.
The deal involved the takeover of three Shoprite outlets — one in Arusha and two in Dar es Salam.
Nakumatt executives in Nairobi did not respond to interview requests on the reported transaction.
This development however comes days after the family-owned company – Nakumatt Holdings – revealed it plans to offload 25 per cent or more stake in its business amid a mounting debt load.
The steep increase in its gross debt in Kenya and in Uganda, it said, had piled pressure on operations and led to long payment delays to suppliers.
“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 the Business Daily in an interview.
“This equity fund will help retire existing funding tools, including bank loans and related debts.”
The firm declined to disclose the identity of the suitors, citing “client confidentiality,” but promised to publicly announce details once the deal is closed.
Nakumatt Holdings also issued a statement in which it 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.
Kenyan retailers are currently battling strong headwinds related to unpaid bills to suppliers.