Tuskys files fresh offer to acquire six Ukwala branches

Tuskys Supermarkets has filed a fresh application to buy out six Ukwala stores, adding a new twist to a protracted take-over bid that started with the retailer’s attempt to acquire three of its rival’s outlets.
The Competition Authority of Kenya (CAK) says Tuskys made the fresh application on June 30, just weeks after it was fined Sh5.3 million and ordered to terminate an earlier bid to acquire three Ukwala Supermarket stores.

Tuskys has also written to the regulator saying that it failed to comply with an earlier order to terminate the acquisition bid by the July 1 deadline due to a mis-interpretation of the competition watchdog’s order.

“The management of Tuskys wrote to the authority on June 30 seeking to acquire the business and assets of six Ukwala branches,” said CAK director general Wang’ombe Kariuki Thursday in an interview.

“We have had a month to deliberate on the matter and we will make a decision on Friday (today).”

Tuskys is Kenya’s second largest retailer after Nakumatt.

It had initially sought to buy Ukwala stores on Ronald Ngala and Tom Mboya streets, and Jogoo Road in Nairobi for Sh200 million, but the transaction value of the three additional outlets is not yet known.

The three other Ukwala outlets include Hyper on Tom Mboya Street, Hakati (adjacent to Afya Centre) and the Haile Selassie Avenue store.

In the earlier bid, which the competition watchdog declared illegal, Tuskys was to acquire Ukwala’s stock, set commodity prices and absorb staff in the three branches and operate them for several months as part of a due process expected to culminate in the chain taking over the rival’s nationwide business.

READ: Tuskys given 14 days to defend Ukwala takeover bid

The two retailers failed to notify CAK which, after getting wind of the deal and carrying out investigations, ruled that the attempted buyout amounted to a horizontal restrictive trade practice.

Ukwala and Tuskys were then given an ultimatum to terminate the deal and revert the stores to their original owner by July 1.

Failure to comply with the order would see directors of the two firms face up to five years in prison, a fine not exceeding Sh10 million or both.

However, the June 30 deadline set by CAK passed with no action from both Tuskys and Ukwala, with operations at the three stores going on as usual.

Five brothers

The regulator now says that on deadline day, Tuskys sent a letter indicating that it wanted to buy six – not three as initially planned – Ukwala stores.

CAK replied to the retailer a week later, asking its directors to explain why they had declined to terminate the acquisition as earlier ordered.

Mr Kariuki told the Business Daily that the directors recently replied, arguing that they had “misinterpreted the ruling to mean that they had until June 30 to submit a fresh application.”

“Tuskys wrote back to the authority two weeks ago giving us reasons they failed to heed our earlier directive,” said Mr Wang’ombe.

“We decided to indulge them since they had already sent in a fresh application. However, we will make a ruling on their new bid as well as their failure to comply with the CAK on Friday (today).”

Tuskys is a family-owned empire which is currently run by five brothers who are directors of the company led by Stephen Kamau, the managing director.

The brothers took over the company from their father, Joram Kamau, who died in 2002. They have grown it into a household name that last year reported sales of Sh25.2 billion.