Westgate attack derails Nakumatt equity sale

The Westgate terrorist attack has derailed plans by Nakumatt Holdings to sell a stake in the supermarket chain to foreign equity investors.

Nakumatt says it lost more than Sh2 billion in stock, furniture, fittings and business when gunmen from the Somali militant group Al-Shabaab stormed the high-end mall and killed at least 67 people, including three of the chain’s staff.

The firm’s managing director, Atul Shah, told Reuters on Friday that the loss at Westgate had also hampered a plan to sell a 25 per cent stake in the business to a strategic investor.

“That takes a back seat now with what has happened. We will continue with that plan but there is a little delay there,” he said.

The chain plans to step up its expansion efforts after the destruction of the flagship store, which was completely destroyed when the mall partially collapsed, leaving a huge hole in the centre.

It opened a new store in Uganda on October 12 and plans to open two more in Kenya and three in Uganda by February next year, partly to absorb the more than 150 workers who lost their jobs at the Westgate branch.

This is also a pointer that Nakumatt is seeking more time to grow the business and increase its valuation.

The chain, which targets middle and upper income customers, has 40 branches in Kenya, Uganda, Tanzania and Rwanda, and hopes to open outlets in Djibouti, South Sudan and Burundi.

Nakumatt told the Business Daily in July that its sales for the year to February was over Sh56.5 billion and that it was targeting sales of Sh65.2 billion for the current financial period.

The sales make it the largest retailer followed by Tuskys and Uchumi, which reported revenues of Sh25.2 billion and Sh15 billion respectively last year.

Nakumatt, which was launched in 1965 but has been owned by Mr Shah’s family since 1978, has over the past decade been courted by South African retailers who were keen to reduce their reliance on the southern Africa market.

The retail chain had indicated in April last year that it would start talks from last June to bring on board fresh investors for the family-owned supermarket to help fund its expansion after hanging up on Sudanese billionaire Mo Ibrahim in 2009.

Mr Shah said earlier that the family would retain majority control of the retailer. Nakumatt turned to commercial banks for funds after buy-out talks with a consortium led by London-based private equity firm Satya Capital collapsed. Satya Capital is associated with Dr Ibrahim.

The supermarket management wants to attract equity investors rather than rely on costly bank loans, and does not intend to list on the Nairobi bourse in the short term.

Analysts, led by Citigroup, have identified East Africa as the next growth frontier for global retailers, making family-owned chains like Nakumatt and Tuskys prime targets for acquisition.

Nakumatt is currently owned by the family and is associated with Hotnet Ltd, a company linked to former Kilome MP Harun Mwau.

Naivas said in August it was looking to sell a majority stake to Massmart, which is owned by the world’s biggest retailer Walmart.

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, says a Citigroup report, which 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,” added the report.