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Uchumi acquires Dar supermarket in growth drive

Uchumi Supermarkets CEO Jonathan Ciano and
Uchumi Supermarkets CEO Jonathan Ciano and Tanzania based Quality Group CEO Yusuf Manji. The acquisition is part of the supermarket’s planned expansion in Tanzania over the next eight months. PHOTO | FILE | NATION MEDIA GROUP 

Uchumi supermarket has acquired a store in Tanzania as part of its aggressive expansion plan in that market. Chief executive Jonathan Ciano said acquisition of the outlet from Dar es Salaam-based Sifamart Supermarkets was concluded last week in a deal financed by debt.

Uchumi is yet to decide whether to take over a second branch operated by Sifamart in the same city. The acquisition is part of the supermarket’s planned expansion in Tanzania over the next eight months, when it expects to have opened a total of six stores in Dar es Salaam, Morogoro, Arusha and Mwanza.

The latest expansion increased Uchumi’s branches in Tanzania to five.

“Uchumi concluded closely guarded discussions with the management of Sifamart allowing Uchumi to take over the operations … effective November 1, 2014,” Mr Ciano said.

“The acquisition was supported by our financiers who have leased the supermarket equipment to Uchumi and our esteemed suppliers who have enabled the working capital to the tune of TSh1.02 billion (Sh53 million),” Mr Ciano said.

He declined to reveal the acquisition cost and whether the transaction included the premises and inventory. Uchumi is reviewing its staffing needs and the qualifications of workers inherited from Sifamart to inform how many will be absorbed. Tanzania’s Fair Competition Commission could not be reached for comment.

This latest acquisition comes soon after rival Nakumatt Holdings bought out South African retail giant Shoprite in Tanzania at a cost of Sh3 billion. The acquisition involved three Shoprite sores located in Dar es Salaam and Arusha.

Reliable sources told the Business Daily that Nakumatt is also eyeing two stores in Uganda owned by the South African firm, which appears to be exiting the regional retail market. Shoprite’s exit from Tanzania was blamed on regulatory actions, with the government piling pressure on the retailer for importing most of its products instead of supporting Tanzanian suppliers.

Uchumi said its Tanzania branches will not be importing products from Kenya.

“All products sold in Uchumi stores in Tanzania are locally procured from Tanzanian-based entrepreneurs,” the firm said in a statement.

Uchumi, with 37 stores in Kenya, Uganda and Tanzania, plans to venture into Rwanda and Burundi in the near term. Expansion into the new markets is to be funded through an upcoming rights issue targeting to raise Sh895 million. The cash call, which opens this coming Monday, is priced at Sh9 apiece.

The firm’s stock closed at Sh8 yesterday, indicating that the rights issue is set at a 12.5 per cent premium on the prevailing market rates. Shareholders are entitled to three new shares for every eight held.

The cash call was approved by shareholders in December 2012 and its delay has seen Uchumi struggle with supplier debts and stock-outs, forcing the retailer to turn to borrowing for working capital.

Its latest debts include a Sh600 million one-year loan from KCB at an interest rate of 18 per cent, a move that will see the retailer incur an extra Sh108 million in finance costs.

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