Mo Ibrahim’s Satya Capital tops race for Nakumatt stake

Satya Capital, the London-based private investment firm associated with Sudanese born business magnate Mo Ibrahim, has emerged as the leading contender in a two-horse race for the 30 per cent stake that is up for sale at retail chain Nakumatt.

People familiar with the matter said the Mo Ibrahim-backed Satya Africa Fund could seal the deal before the end of year “because it is no longer the subject of negotiations.”

Nakumatt is selling a third of its ownership to the newcomer in a Sh1.8 billion deal.

Satya was until late October locked in a tight race for the stake with a Middle East-based investment group said to be Kingdom Holding Company —associated with the Saudi royal family.

But the London-based firm is said to have stepped ahead of its rival last month with a more superior offer.

“It is now past the negotiation stage, Nakumatt are just waiting for (one of the parties) to wire in the cash,” said a source close to the transactions.

Satya Capital’s executive assistant, Rachel Townend, said the investment firm had “nothing to comment on this matter.”

“Satya Capital is an independent investment firm, focused on Africa,” reads the company’s website. “We invest in growing businesses across the continent.”

Atul Shah, the Nakumatt managing director, declined to reveal the identity of the parties in the talks, citing a confidentiality agreement with potential buyers.

Mr Shah in an interview last month indicated that the retail chain had left open the possibility of taking on board the two contenders.

Nakumatt is currently majority owned by the Atul Shah family and Hotnet Ltd, a company associated with Kilome MP Harun Mwau.

With a Sh1.8 billion price for a 33 per cent stake, Nakumatt, the retail with subsidiaries in Uganda and Rwanda, is currently valued at about $75 million (Sh5.4 billion).

The retailer, whose finances have been under pressure from the slowdown in consumer spending is backing up the Sh1.8 billion it expects from the sale proceeds with a Sh4 billion syndicated medium term loan from NIC, KCB, CFC Stanbic and Barclays banks.

Should the two deals come through, Nakumatt will have in its pockets a total of Sh5.8 billion in new cash that Mr Shah says will go into financing regional expansion as well as boosting stocks.

The entry of the European-based investor billionaire Mo Ibrahim is expected to send positive signals about the growth potential into Kenya’s retail market and raise Kenya’s profile as a viable investment destination.

It would also mark an indirect come-back for the Sudanese-born British national who until mid last year was the majority shareholder in Kenya’s second mobile phone service provider then known as Celtel.

Mr Ibrahim is one of the world’s most closely watched investors and was named Britain’s most influential black person last year, besides also appearing on the Forbes 2008 Rich List and the TIME’s 100 list for the last two years.

Mr Ibrahim, who owns a business empire estimated to be worth over $2.5billion (Sh190 billion), made his fortune as a telecoms expert and entrepreneur.

He is the founder of MSI Cellular Investments that he later renamed Celtel International and whose footprints spread over 15 African countries.

In 2005 he sold his flagship company to MTC of Kuwait for a reported $3.4 billion and has since devoted more of his time to philanthropy through his Mo Ibrahim Foundation which awards former African heads of state who demonstrate excellence in leadership in office.

Mr Ibrahim is the chair of Satya Capital’s advisory board, which manages a multi-million dollar fund dedicated to investing between $20 million and $50 million in high growth potential businesses in Africa.

Last month, Satya invested $18 million in Nigeria’s Hygeia Ltd, a multi-specialist healthcare provider based in Lagos.

The private investment firm also put in an undisclosed amount of money in Guaranty Trust Bank last year and topped up the investment this year.

Guaranty Bank is a Nigeria-based corporate financier with operations in Anglophone West Africa and the United Kingdom.

“Mo invested in mobile telephony in Africa long before everyone else, he has made his money by making the right calls and his interest in the region means there is something interesting,” said George Odo, managing director for African Capital Partners, a private equity firm.

Head of fund management at Sanlam Investment Einsten Kihanda said Kenya’s relatively fast population growth (estimated at about 2.5 per cent) positions retail business among the high growth potential sectors.

Supermarkets account for about a third of the total retail space in Kenya, according to details in a confidential Uchumi strategic plan seen by Business Daily.

The report ranks Nakumatt as Kenya’s leading retail chain by sales revenue while Tuskys Supermarkets comes second in the pecking order.

Other players in the highly competitive field are listed as Ukwala, Chandarana, Stagematt and Woolmatt.

“Nakumatt’s expansion into the region is a success story and an investment in the business by an investor of Mo’s profile would be seen as a vote of confidence in the management,” said Mr Kihanda.

The Sanlam manager said a 30 per cent stake may not necessarily give Satya the leeway to push for an overhaul of Nakumatt management team.

Mr Shah said the new investors would be getting some seats on the executive board of directors.

A series of misfortunes that struck the retailer in the past twelve months and a softening economy which eroded consumers’ purchasing power pushed Nakumatt into a liquidity squeeze prompting the current search for an equity partner.

The firm was starved of an estimated Sh240 million in average monthly revenue following demolition of its Thika Road outlet late last year which was said to be sitting on a government road reserve and the razing down of its “down town” city centre store.

The retailer also took a hit in 2006 after the Central Bank of Kenya put its main banker, Charterhouse Bank, under statutory management.

Mr Odo of African Capital Partners said a successful cash injection for Nakumatt may offer a lead as to how Uchumi- Kenya’s one time leading supermarket chain that almost went burst following a botched expansion plan- can shore up its capital base.

Last week, Uchumi’s receiver manager Jonathan Ciano announced that he would be requesting creditors and the Kenya government (a shareholder) to convert their debts in the firm into equity to facilitate its return to trading at the Nairobi Stock Exchange.

Uchumi has been on a recovery path in the last three years after being placed under receivership in 2006 weighed down by a Sh1.3 billion debt.

Figures provided by Uchumi indicate that out of Sh900 million owed to suppliers, Sh708 million had been cleared.

Mr Ciano added that secured debt owed to banks plus accrued interest that amounts to Sh979 million will be cleared by next week.

Plans to shore up the supermarket’s capital base which was eroded during the loss-making years of the first half of this decade have not been successful as two debenture offers to existing shareholders have returned undersubscribed.