Naivas in family feud over Sh6bn stake sale


Naivas supermarket outlet along Muindi Mbingu Street in Nairobi. PHOTO | EVANS HABIL | NMG

Naivas Supermarkets is locked in a fresh family feud over ownership of the giant retailer and proceeds from the sale of a minority stake to a consortium of investors for Sh6 billion.

Newton Kagiri Mukuha, the eldest of the three brothers who since 2012 have been fighting a bruising battle for control of Naivas Supermarkets, has renewed his fight over the retail chain in a row that has seen the High Court block further stake sales in the firm.

Mr Kagiri sought the ouster of his brother, David Kimani, as CEO of Naivas, a seat on the board of the retailer, a 20 percent stake and additional shares from the 20 percent stake held by his dad, the late Peter Mukuha Kago.

He also petitioned the court to freeze further share sales in Naivas and for a deposit of the Sh6 billion, which a consortium of investors paid for a 30 percent stake in the retailer in an interest-earning joint account.

Mr Kagiri reckons that he is entitled to a 20 percent stake worth Sh4 billion from his seed capital that established Naivas and the inheritance of his father’s stake.

The businessman is challenging a High Court ruling of 2014 that found he had no stake in the retail chain after the judge said he ran down all the stores he inherited from his father.

His brothers have previously termed him a stranger to the retail chain in a dispute that echoes that of Tuskys Supermarkets where a family feud has in part led to the near-collapse of the store.

The feuds will offer a rare peep into the lives of the secretive family that runs Naivas, which over the past decade has climbed from Kenya’s fourth-largest retailer to the biggest supermarket.

The latest family fight comes months after Naivas received Sh6 billion from the International Finance Corporation (IFC), private equity firms Amethis and MCB Equity Fund and German sovereign wealth fund DEG for the minority stake, with the deal set to fuel Naivas’ expansion across the country.

The new capital injection in Naivas is earmarked for expansion in the highly competitive supermarket business that has attracted major players, including the Majid Al Futtaim-backed Carrefour franchise as well as South Africa’s Shoprite and Game. The latter two have since exited Kenya.

Mr Kagiri is seeking a share of the Sh6 billion in a suit that will receive opposition from his siblings whom he accuses of consigning him to poverty in Nairobi’s Kayole estate.

"Court be pleased to issue order compelling the directors of Naivas to jointly deposit the proceeds of sale of shares to Amethis in a joint interest-earning account pending the hearing and determination of the appeal," said Mr Kagiri.

"Issue temporary injunction restraining the respondent herein and all other directors of Naivas from further sale of shares and assets."

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 Naivas received for share sales and a stake worth Sh4 billion.

Appellant judges David Musinga, Hannah Okwengu and Asike Makhanda agreed to freeze further share sales, but failed to issue orders on Mr Kagiri’s other demands.

"In the meantime, the status quo in so far as the shares in dispute are concerned be maintained pending hearing and determination of the appeal," said the judges in a ruling delivered on November 25 and made public last week.

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 South Africa’s Massmart. The deal collapsed.

Justice Anyara Emukule in 2014 found that Naivas had ceased to be a family business in 1999 when assets that the late 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 under Rongai Self-Service Store —which had three supermarkets in Elburgon, Rongai and Naivasha.

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 percent stake each and a 20 percent ownership to their father, Mr Mukuha. Mr Kimani and Mr Gachwe have a 25 percent stake each in Naivas. This was ownership ahead of the Sh6 billion deal.

"Clearly, the objector (Kagiri) has no interest, legal or equitable share, in Naivas Limited," Justice Emukule 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.

Justice Emukule found that Mr Kagiri could only lay claim to part of the 20 percent stake that was allocated to his father.

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.

At the appeals court, Mr Kagiri is pushing for nullification of Naivas shareholding based on court records from his siblings, and the recognition that Naivas was a product of Rongai Self-Service Store.

He reckons that Mr Gachwe did not deserve the 25 percent ownership because he never contributed seed capital for Rongai Self-Service Store.

Mr Kagiri wants the estate of his late father offered a 30 percent stake, Mr Kimani’s stake cut to 10 percent from the 25 percent, Ms Wambui’s increased to 25 percent from 15 percent, Ms Wairimu’s retained at 15 percent and him 20 percent.

The businessman is also seeking redistribution of his father’s stake after Mr Gachwe and Mr Kimani were offered 20 percent stake each of the late Kago’s shares while the two sisters equally shared the remaining 60 percent ownership.

Kenya’s retail sector has seen two major supermarket chains collapse in recent years including Nakumatt, while Carrefour has entered the market and grown into Kenya’s second biggest retailer in just four years behind Naivas.

Naivas has more than 75 stores across Kenya, up from 26 stores in 2013.

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