South African retail giant Massmart has gone beyond Naivas Supermarket in its pursuit of an acquisition target to set up shop in Kenya.
The South African retailer is reported to be angling for a buyout to enter the local market where the dominance by local firms has acted as barrier to the entry of giant foreign retailers.
Its pursuit of a deal has triggered a feud at Naivas, where a family member has moved to court seeking to stop his siblings from selling a 51 per cent stake to Massmart.
The firm last week said it was in contact with a number of key players even as it booked space in the Sh12.6 billion Garden City Mall on Nairobi’s Thika Superhighway set for completion next year.
“Our interest in investing in Kenya is well known and we have met with several important players in that market,” said Massmart in an e-mail response to the Business Daily.
Three of the dominant retailers — Nakumatt, Tuskys and Naivas — are family-owned, making them prime targets for acquisition.
Tuskys shareholders are currently involved in a court battle for control, with some of the directors blaming the power struggle on outsiders engineering an aggressive take over.
Nakumatt Holdings has been talking of selling a significant stake to a strategic investor to help support its expansion across East Africa. It is currently owned by the Shah family and Hotnet Ltd, a company associated with former Kilome MP Harun Mwau.
Nairobi-bourse listed Uchumi Supermarket was in 2008 involved in acquisition talks, with South African-based Shoprite being one of its eight suitors. The retail chain, which closed shop briefly in mid-2006 after failing to pay creditors, has returned a profit for the past five years.
Massmart earlier said it was entering Kenya through its subsidiary Game. The Johannesburg-listed firm, which Citigroup says is Africa’s third largest distributor of consumer goods, posted sales of Sh530 billion, making it five times bigger than Kenya’s most profitable firm Safaricom on sales.
Wal-Mart, the world’s biggest retailer, in 2011 spent $2.4 billion (Sh201 billion) on a majority stake in Massmart.
Massmart has a handful of stores outside South Africa, giving it a foothold but not a major presence in Ghana, Nigeria and Uganda.
Kenya has the second most developed retail market in sub-Saharan Africa with about 30 per cent of retail shopping being done in formal outlets, a Citigroup study has shown.
The study identified East Africa as the next growth frontier for huge retailers keen to cashing on a growing middle-class and rising consumer demand.
But Citigroup reckons that dominance of the sector by local firms has acted as a barrier. “Acquisition looks to be the easiest route to build scale in this region,” said the report.
Massmart declined to talk of its reported pursuit of Naivas: “We don’t however, comment on acquisitions, potential, speculative or otherwise.”