Nakumatt moves goal post for share sale deal

East Africa’s biggest retail chain Nakumatt Holdings is holding on for a $25 million funding from a yet to be named partner that could roll in this year. But talks for the release of the funds likely to reduce by 30 per cent the share holding of managing director Atul Shah and Hotnet Limited, a company associated with assistant minister for Transport John Harun Mwau, are dragging on.

London-based private investment provider Satya Capital and Kingdom Holding Company of Saudi Arabia are the investment groups primed to snap up the stake in Nakumatt.

According to plans by Nakumatt, money coming from the new partners will be channelled into building four more retail outlets in Kenya and three other shops in Uganda and Rwanda, increasing Nakumatt’s network to 21 outlets in east Africa. But is this the right strategy for Nakumatt? Will the aggressive expansion programme dry out the retailer’s liquidity?

Mr Shah, the main shareholder of the retail chain, spoke with Business Daily writer JIM ONYANGO on the reasons for sourcing funds from externally and how the retail chain is fairing on in the face of low consumption by customers who have been hit hard by the increasing price inflation.

It is public knowledge that Nakumatt intends to sell a 30 per cent stake to a strategic investor. Have you decided on the investor? If so, who? We are yet to decide on one particular investor. But we are in talks with two serious investors and intend to close the deal by the end of the first quarter or at the beginning of the second quarter.

We started the talks last year, but there are a few loose ends that we are hoping to tie up before publicly announcing the deal.

Isn’t the conclusion of the deal long overdue? Why is it dragging on?

I’ve seen partnership negotiations that have even taken two years. We have only been in this negotiations for eight months. That’s not long to cause any concerns. We want to make sure that the deal is concluded well.

But I can confirm to you that we are ready to take in the new partner. We can only marry one women at a time, this means we will only take in one partner who will inject the much needed equity capital.

Of the two potential partners, which one are you likely to invite to take up a seat on your board? How much is that partner likely to put into the business?

We are not disclosing names yet, but what I can tell you is that the deal is close to being concluded and putting out names could jeopardise it. We want to keep the identities of our potential investors secret for now. The new investor will put $25million into the business. The money will not go into the pockets of any of our shareholders. Specifically, this equity capital will go straight into our network expansion. We want to go to where our customers are. We want to increase our visibility in Kenya and across east Africa.

We are still a long way from where we want to be, this means that we have to vigorously increase our internal capacity and exposure to our customers.

You talk passionately about opening up new shops in Kenya, Uganda and Rwanda. Are you not biting more than you can chew? This rapid expansion may be your Waterloo as it is likely to eat into you cash base, putting the company into liquidity problems.

That could be true, but we are not expanding blindly. Expansion has to be done cautiously.

What we know is that everywhere we have opened a Nakumatt store we have managed to be successful.