EDITORIAL: Nakumatt, Tuskys deal must follow due process

Nakumatt Managing Director Atul Shah (left) and Tuskys chief executive Dan Githua. PHOTOS | FILE | NMG
Nakumatt Managing Director Atul Shah (left) and Tuskys chief executive Dan Githua. PHOTOS | FILE | NMG 

Reports that troubled supermarket chain Nakumatt is exploring a possible merger with rival Tuskys would, in ordinary circumstances, make good news.

This is principally because the deal, if successful, would bear the potential of ending the suffering of hundreds of the retail chain’s creditors, suppliers and employees.

Nakumatt, formerly the behemoth of retail market in East Africa, is in deep trouble – hamstrung by a heavy load of debt and a deep liquidity crisis that has seen many suppliers stop dealing with it.

Over the past five years, Nakumatt has made numerous attempts to get out of the crisis, including via the search for new and deep-pocketed investors without much success.

It is, however, deeply worrying, that the two retail chains appear to be stuck in the past, or in denial of the fact that they are now big enterprises that need to show some fidelity to the law and corporate norms.

Their announcement of the planned merger, for instance, did not follow the lawful path having been done without seeking the necessary approval from the Competition Authority of Kenya.

Nakumatt managers were probably over-excited by the deal and overlooked these legal requirements. But they must now temper that excitement with sober diligence to the law on M&A deals.

They must realise that thousands of jobs and supplier contracts worth billions are at stake as well as creditors the retail chain owes billions of shillings.

Though a privately owned business, the financial bleeding at the supermarket has put many livelihoods at stake. It would therefore help if the management treated the matter with the seriousness it deserves.

In the same breath, the government ought to support the retail sector with well-thought-out legislation and policies. It is incredible that the sector grew so big and came to hold so much in assets and liabilities without any legal structure.

Not very long ago, Nakumatt itself was bigger than most commercial banks that are heavily regulated.

Now that the matter of the merger has reached the public domain and given the dire straits Nakumatt is in, the parties in the proposed merger should move with speed and put the relevant documents before the regulator.