The announcement Monday that owners of retail chain Tuskys had hired a professional to oversee its operations has kicked up a storm after one of the rival sibling camps fighting for control of the supermarket disowned the appointment.
Yusuf Mugweru Kamau, the fourth born in the family, who has differed with his siblings over control of the retail chain, yesterday denied claims by his elder brother that Tuskys shareholders had met and agreed to leave the business in the hands of a professional manager.
John Kago, the first born in the family, who doubles as Tuskys chairman, on Monday unveiled Daniel Githua, the chief executive of Speed Capital, as the new managing director of the retail chain, saying the appointment was made with the agreement of the entire family after a February meeting where they resolved their differences.
But Mr Mugweru, through his lawyer Philip Murgor, yesterday maintained that no such meeting took place to resolve the differences which are the subject of law suits pending before court.
Mr Mugweru further questioned Mr Githua’s suitability to head the retail chain that is Kenya’s second-largest and threatened to file a winding-up petition on the business should his siblings fail to speedily resolve their differences.
On Monday Mr Kago announced that Tuskys, a family business jointly owned by five brothers and two sisters, had for the first time appointed a non-family CEO in the retail chain’s 25-year history to inject professionalism in the business as it prepared to go public.
Yesterday, Mr Mugweru claimed that his elder brother Stephen Mukuha — who he has accused alongside two brothers of diverting Sh1.6 billion from the company’s accounts — handpicked Mr Githua as the new CEO who has previously worked under him [Mr Mukuha].
The new CEO, Mr Mugweru claimed, will be under Mr Mukuha’s control. Mr Mugweru declared the appointment as invalid, having been made at a time when the family is embroiled in wrangles arising from allegations of fraud, mismanagement and assault.
“The board and shareholders have not met nor resolved to appoint Mr Githua as CEO,” Mr Mugweru said in a statement sent to the Business Daily.
“Mr Githua (the newly appointed chief executive) would not qualify to hold such a position having worked for and under Mr Mukuha — the discredited CEO. His appointment is thus null and void.”
Tuskys has been run by seven siblings, including Mr Mukuha, Mr Mugweru, Mr Kago, Mr George Gachwe (who was this week replaced as managing director), Sam Gatei, Mary Njoki and Mary Njeri (deceased).
Apart from Mr Kago, the four brothers own a 17.5 per cent stake each in Orakam, the holding company of Tusker Mattresses Ltd. Mr Kago and his two sisters hold the remaining 30 per cent stake, shared equally among them.
The siblings began fighting in February 2012 when Mr Mugweru wrote to the retail chain’s financial director demanding the register and bank accounts of all firms owned by Tusker Matresses.
He claimed that Mr Mukuha, Mr Gachwe and Mr Kamau had used related companies and subsidiaries like Enkarasha, Magic Pay and Ndykak Investments to irregularly draw Sh1.6 billion from the retailer.
He accused his co-directors of trying to subvert the course of justice by converting the said companies into subsidiaries of Tusker Mattresses and the money in dispute to loans. The three, however, denied the charge, accusing Mr Mugweru of abusing the legal process by publicising the dispute in the media.
The accused later failed in an attempt to stop police from searching the supermarket’s head office in Embakasi to seek evidence of the alleged fraud.
It is during this period that Mr Mukukha is accused of having physically assaulted Mr Mugweru in front of Tuskys employees at their headquarters when the latter confronted him over the funds. Mr Kago and Mr Gatei in April of the same year then backed Mr Mugweru in his theft claims and accused Mr Mukukha of mismanaging the company.
The three demanded a forensic audit of Tusky’s finances, the immediate removal of their brother and the recruitment of a professional manager.
“There is an ongoing criminal investigation at CID Headquarters against Mr Mukuha and Mr Gachwe for the unauthorised diversion of Sh1.6 billion of Tuskys funds to companies owned by or associated with them,” Mr Mugweru said yesterday. “This remains the most critical dispute within the family company.”
Mr Mugweru claimed that the retailer was doing so badly that shareholders had not earned a dividend for the last three years and that talk of public listing was therefore misplaced.
The appointment of Mr Githua, who was Tuskys’ head of audit for three years to 2012, now seems to have opened old wounds that appeared to have been healing in the past two years.
Mr Mukuha was the managing director of the retail chain between 2001 and August last year when he relinquished the position to his younger brother Gachwe following the botched attempt to acquire six Ukwala Supermarkets stores.
Mr Kago on Monday said the family had agreed on listing through an initial public offering (IPO) in five years as the best bet for the retail chain to raise additional cash for its expansion.
“Tuskys’ shareholders have decided to leave active management to the professionals in order to gain from a wider pool of resources. We intend to prepare this company to be great for generations to come,” Mr Kago said in a statement sent to newsrooms on Monday.
“He is expected to lead the company through the next strategic phase running from 2015-2019.”
In addition to listing, the separation of ownership from management was expected to help Tuskys escape the fate of other African family-owned businesses that have proved incapable of thriving beyond the founders. From the humble shop it was in Rongai town, Tuskys has grown to become the giant retail chain it is today.
Nakumatt, Ukwala, Naivas and Eastmatt are other large retail chains that are family-owned and run. Uchumi, which is listed on the the NSE, is the only large chain that is not family-owned.
Naivas, which was founded by a brother of Tuskys’ pioneer, has also had its fair share of sibling wars with five siblings threatening to sell a store belonging to their eldest brother over a Sh46.3 million debt.
The High Court last December gave the green light to the five — who control Naivas — to recover Sh12.1 million from their brother’s Greenmart Supermarket in Nairobi’s Kayole estate.
The Tuskys rivalry may now be coming to a head with Mr Mugweru issuing an ultimatum to his siblings to constitute an independent board to run the company.
“The appointment of an independent board of directors, and the adherence to acceptable corporate governance procedures is only one of the preconditions to the survival of Tuskys as a company,” said Mr Murgor, who is Mr Mugweru’s lawyer.
“Short of this our clients will be constrained to move the High Court for winding up on grounds of irreconcilable differences between shareholders.”