Big brother loses as court battle for Naivas endsSunday November 02 2014
Newton Kagiri Mukuha, the eldest of the three brothers who have been fighting a bruising battle for control of Naivas Supermarkets, was the biggest loser when it all came to a close last Friday.
The High Court found that Mr Kagiri has no stake in the retail chain, having run down all the stores he inherited from his father.
The court made the decision in a case in which Mr Kagiri had objected to the sale of a 50 per cent stake in Naivas to South African retail chain Massmart, claiming that he was entitled to 20 per cent of the sales proceeds as part of his inheritance.
Justice Anyara Emukule found that Naivas had ceased to be a family business in 1999 when assets that the late Peter Mukuha Kago – the father of the warring siblings – had accumulated were shared among his children.
Court documents show that October 31, 1999 is the day the Mukuha family decided to share the family assets partly to end squabbles Mr Kagiri had sparked over the multi-million shilling business empire. Mr Kagiri was offered the Rongai store and a house.
His younger brother, Simon Gachwe and sister, Grace Wambui, were given a house and the Elburgon store while David Kimani and his sister, Linet Wairimu, took over the Naivasha business.
Mr Kimani and Mr Gachwe later teamed up to run the Naivasha business and ultimately grew the supermarket into the retail giant that is Naivas.
The two brothers later offered their two sisters a 15 per cent stake each and a 20 per cent ownership to their father, Mr Mukuha. Mr Kimani and Mr Gachwe have a 25 per cent stake each in Naivas.
“Clearly, the objector (Kagiri) has no interest, legal or equitable share, in Naivas Limited,” the judge said, adding that the family business originally funded by the joint financial efforts and managed under the name of Rongai Self-Service Store with branches in Rongai, Elburgon and Naivasha had ceased to be a family affair upon the signing by family members of the resolution to share the property on October 31, 1999.
READ: Massmart plans new Nairobi outlet after Naivas deal flops
Justice Emukule found that Mr Kagiri could only lay claim to part of the 20 per cent stake that was allocated to his father given that his suit was hinged on inheritance of the late Mukuha’s wealth.
The fight for control of Naivas went public in November 2012 when Mr Kagiri went to court, seeking orders to stop the sale of the supermarket to Massmart.
Mr Kagiri said he had sought court intervention after his siblings, led by Mr Gachwe and Mr Kimani, excluded him from owning a piece of the retail chain, a move that offered Kenyans a rare peep into the publicity shy family that runs Naivas.
Court documents show the decision angered Mr Kagiri’s brothers who filed a hard-hitting response that branded him a chang’aa trader who had “squandered multiple opportunities” to own shares in the business after he mismanaged Rongai Self Service Store, wjich had been placed under his care.
Naivas, through its chairman Mr Gachwe, argued that Mr Kagiri was a stranger to the retail chain as he was not part of the shareholders.
The late Mukuha was the brother of Joram Kamau, the founder of Tuskys Supermarkets – another fast growing retail chain – whose ownership is also the subject of a vicious court battle among siblings.
The battle for the control of Naivas is reminiscent of globally famous feuds between the Ambani brothers, Mukesh and Anil –– India’s two wealthiest men — who ended up splitting the massive Reliance Industries empire built by their father, Dhirubhai Ambani.
In the Naivas affair, as in the Ambani family drama, money was the central theme with Mr Kagiri claiming a share of the billions of shillings that Massmart had offered the owners for the 50 per cent plus one shares in Kenya’s third largest retail.
Naivas said the deal was meant to help it inject fresh blood and ideas into the business while Massmart was looking for a window to keep up with the rapid continental expansion of its South African rival Shoprite.
The siblings’ spat ultimately derailed Massmart’s plans to set up shop in Kenya through a partnership with a local operator. The South African retail giant has since opted to open its own stores in Nairobi from next year.
The entry of Massmart, which operates 105 stores in 12 African countries, is expected to mark a South African operator’s entry into Kenya’s formal retail market scene since the exit of retail chain Metro Cash and Carry in 2005.
South African companies have in the past found it difficult to crack the Kenyan market, prompting the exit of big brands like movie firm Nu Metro, fast foods giant Nandos and Supreme Furniture.
Naivas has been in an intensive expansion drive and has over the past year opened five stores. The retail chain is this morning expected to open its first branch in the lakeside town of Kisumu.
It has 33 stores and has overtaken the listed Uchumi Supermarkets, both on sales and number of outlets.
READ: Naivas to hire 450 employees for four new branches
Things have been rough between Mr Kagiri and his siblings who grew up together in Kitale.
Mr Kagiri has been arrested for siphoning Sh230,000 from a family store in Rongai near Nakuru town and was last year was sued by Naivas for non-payment of a Sh12 million debt, resulting in a judgment that directed the retail chain to attach his assets.
Court fillings indicate that Naivas started out as Rongai Self-Service Store on June 1, 1990 after Mr Gachwe bought a store dubbed Magic Superstores from his uncle and founder of Tuskys Supermarket for Sh1 million.
Magic Superstores was later rebranded with Mr Gachwe and Mr Kimani each owning half of the supermarket that had opened two more branches in Naivasha and Elburgon.
They employed Mr Kagiri who was then a chang’aa dealer in Tiwan Estate in Kitale, according to court papers.
In 1995, Mr Gachwe fell out with Mr Kagiri after he accused his elder brother of siphoning Sh230,000 from the store leading to his arrest.
This prompted the family patriarch the late Mukuhi, who died in 2010, to call a meeting which concluded that the two could not work together.
“The late father called a meeting at which it was found that he (Mr Gachwe) and the objector (Mr Kagiri) could not work together and the family resolved to cede the Rongai branch to the objector,” court documents say.
The Rongai store was consequently rebranded Newton Kagiri—Mukuha Stores and closed shop months later, prompting the family to open for him a store in Kayole christened Greenmart on the intervention of his mother.
“The mother said they should not leave or forget their brother,” read the judgment. Mr Kagiri was offered goods worth Sh47 million to set up Greenmart and failed to repay Sh12 million, leading to a court action.
“In the upshot, the objectors applications are dismissed with costs to the petitioner (Mr Gachwe) and the estate of late Peter Kago.”