An Ukwala Supermarket outlet on Tom Mboya Street in Nairobi. Competition Authority of Kenya has launched investigations into Tuskys Supermarket’s involvement with Ukwala, amid talk that it acquired some outlets owned by the rival firm. Photo/Salaton Njau
What you need to know:
Kariuki Wang’ombe, director-general of the competition watchdog, said Thursday that the authority had not been informed of the transaction.
Tuskys has been running three Ukwala stores in the city ahead of a complete rebrand of the outlets, people familiar with the deal say.
Where a firm is found to have breached the law, the regulator can cancel a transaction, have the directors jailed for five years or order payment of a fine of up to Sh10 million.
The Competition Authority of Kenya has launched investigations into Tuskys Supermarket’s involvement with Ukwala, amid talk that it acquired some outlets owned by the rival firm.
Kariuki Wang’ombe, director-general of the competition watchdog, said Thursday that the authority had not been informed of the transaction.
Tuskys has been running three Ukwala stores in the city ahead of a complete rebrand of the outlets, people familiar with the deal say.
Both retailers refused to comment on the issue, but Business Daily found out that sales receipts from the Ukwala stores in the central business district (CBD) bore the TML (Tusker Mattresses Limited) logo and phone contacts.
“We are currently looking into the issue to determine the nature of transaction,” Mr Wang’ombe said in an interview yesterday, adding that mergers or significant purchase of shares or a business interest must be approved by the authority.
“We are currently not sure if it is a takeover (Tuskys/Ukwala deal) with controlling interest. If that’s the case, it is not enforceable by any law.”
Where a firm is found to have breached the law, the regulator can cancel a transaction, have the directors jailed for five years or order payment of a fine of up to Sh10 million.
The authority can also impose a financial penalty equivalent to 10 per cent of a firm’s sales.
If Tuskys is found liable, it may face a penalty of up to Sh2.5 billion given that it generated sales of about Sh25.2 billion last year, making it the second-largest retailer based on sales behind Nakumatt whose revenues stand at Sh55 billion.
This paper could not establish whether Tuskys had bought out Ukwala Supermarkets or acquired the outlets and that its rival would continue operating in other locations.
Tuskys had 48 branches in Kenya by this October. “Tuskys started its operation in three Ukwala outlets two weeks ago. They absorbed permanent staff and let go of the temporary workers,” said a source at Tuskys on condition of anonymity.
The three Ukwala outlets operated by Tuskys are Ronald Ngala, Jogoo Road and Tom Mboya branches —firming Tuskys’ hold on the central business district where it had nine branches.
Nakumatt Supermarkets has four branches while Uchumi and Naivas have two stores each in the city centre.
Ukwala Supermarkets had three branches and it has trailed rivals Nakumatt, Tuskys, Naivas and Uchumi in expansion. This has seen its market share shrink and Naivas dislodge it as Kenya’s fourth-largest retailer.
Kenya created an independent watchdog last year to fight price fixing, abuse of market dominance and those in breach of merger rules.
The authority replaced the Monopolies and Prices Commission which operated as a department of the Treasury in changes that saw the government impose hefty fines on those in breach of competition laws.
Previously, market malpractices in Kenya attracted a maximum fine of Sh200, 000 or a jail term of up to three years for offending companies, a light sentence for firm whose annual turnovers are in excess of a billion shillings.
The Ukwala deal, if it comes to pass, will be the first major transaction involving Tuskys.
Players in the market reckon that Tuskys’ moves are informed by the need to consolidate its market share ahead of rivals, especially cash-rich foreign firms that are showing a keen interest in a piece of the Kenyan market.
South Africa’s Massmart has said it will enter the Kenyan market before December next year and is in talks to buy a majority stake in Naivas.
Citigroup says Kenya is set to witness increased deal- making in coming years given that the dominance of the sector by the top four retailers has acted as barrier for entry of new players.
Nakumatt, which has 41 branches, is planning an equity sale next year.
