Nakumatt has set the cost of a 25 per cent stake of the retail chain at Sh7.7 billion, potentially valuing the entire business at about Sh30.8 billion.
The retailer on Wednesday told news agency Reuters that it was in the final stages of selling the stake to a strategic investor, in what insiders say is part of a plan to retire the supermarket chain’s heavy debt load.
Nakumatt, which is Kenya’s biggest retail chain with 61 stores across East Africa, only identified the buyer as a foreign fund.
“We are already at final stages with the investor. We are just waiting for the money to come,” Nakumatt managing director Atul Shah was quoted in a report by Reuters.
The agency said Mr Shah did not identify the buyer but set the price for the stake at $75 million (Sh7.725 billion).
The share sale has been in the works since 2009.
“Barring any eventualities, this deal will be closed in a few weeks with full disclosure once done,” Neel Shah, the business development director at Nakumatt Holdings, had earlier told Business Daily in an interview.
The executive is a son of Atul Shah, the MD.
Nakumatt’s gross debt more than tripled to Sh15 billion in February 2015 from Sh4.2 billion in 2011, piling pressure on operations and resulting in payment delays to suppliers.
“This equity fund will help retire existing funding tools, including bank loans and related debts,” said Mr Shah.
The planned sale of a stake to the strategic investor was mooted in 2009 when a consortium of investors led by London-based private equity fund Satya Capital — associated with Sudanese billionaire Mo Ibrahim — expressed interest but the deal did not go through.
Nakumatt’s decision to tie up with a strategic investor means the retail chain has abandoned earlier plans to raise capital through an initial public offering at the Nairobi Securities Exchange.
Kenya’s top tier retailers — Nakumatt, Tuskys and Naivas — are family-owned, making them prime targets for acquisition by PE funds and foreign supermarket chains.
Troubled Uchumi Supermarkets is the only listed retailer in East Africa. Nakumatt, with 42 outlets in Kenya, is majority-owned by the Shah family (92.3 per cent).
This means the sale of a 25 per cent stake will still leave the Shah family as majority shareholder.
South African rating agency GCR said in a note dated December 17, 2015 that the deal would see substantial capital injected into the business, a feat that would markedly ease funding pressure and facilitate the planned rollout of branches.
Nakumatt’s gross sales grew by nearly a tenth to Sh51.6 billion for the year ended February 2015 compared to Sh48 billion a year earlier.
Surging finance costs have, however, eaten into the supermarket’s earnings, with gross profit plunging to Sh305 million in February 2015 compared to Sh823 million in 2013.
Kenyan retailers are currently battling strong headwinds related to unpaid bills to suppliers. Supermarkets are also struggling to finance working capital from costly bank loans.