Nakumatt is seeking a partnership deal with the rival retailer as it faces existential threat under the weight of debt.
A tie-up with Tuskys is the latest scramble by Nakumatt whose proposal to receive a bailout from the government was snubbed.
The family-owned retailers say they are exploring potential for “co-operation and business integration.”
Tuskys Supermarket and Nakumatt Holdings have announced they are still in early stages of exploring a business alliance or a a merger, with any partnership expected to receive regulatory approval before it can proceed.
Nakumatt has faced an existential threat in recent months after a delay in getting new capital and failure to refinance its obligations saw it default on employees, suppliers and lenders.
A tie-up with Tuskys is the latest scramble by Nakumatt whose proposal to receive a bailout from the government was snubbed.
“These confidential discussions are continuing and although the engagement has been positive and good progress has been made, it is important that we acknowledge that a formal agreement is yet to be reached and will be subject to notification and approval by regulators and lenders,” the retailers said in a joint statement.
The family-owned companies, whose founders traded favours in their infancy decades ago in Nakuru, say they are exploring potential for “co-operation and business integration.”
The parties say they could start on a loose partnership at the staffing level before proceeding to swapping assets and a complete merger.
Regulator approval
The talks leaked before the companies notified the Competition Authority of Kenya (CAK) of their intention. A merger of the firms will have to get the approval of the regulator given its impact on the retail sector.
Their combination will result in the largest retailer in the country, with rivals such as Naivas Supermarket and Uchumi Supermarkets far behind.
“Any transaction of this nature and magnitude is complex, involves consideration of a broad range of issues and interests of key stakeholders including employees, suppliers, landlords and lenders whose interests are paramount and are being carefully considered,” the retailers said.
CAK will assess whether their tie-up will limit competition to the detriment of consumers and suppliers among other interested parties.
Tuskys, which is presumed to be stronger financially relative to Nakumatt, is expected to do the heavy lifting in the early phase of the merger including ensuring the latter accesses stock from suppliers.
Tuskys’ CEO Dan Githua told the Business Daily that the two firms will effect a complete merger, meaning that they will collapse to form an entity that will assume all their assets, liabilities and in which shares will be allotted to current owners of the two retailers.
The private firms don’t publish their financial records.
It has however emerged that Nakumatt is indebted to the tune of tens of billions of shillings, with its creditors including KCB Group #ticker:KCB and Diamond Trust Bank #ticker:DTK.
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