Tuskys Supermarkets will take up a 51 per cent stake in troubled Nakumatt as part of a proposed buyout deal that will also see Nakumatt’s long-serving chief executive and top owner, Atul Shah, step down.
Newly filed court papers indicate that Tuskys’ purchase of a majority stake in Nakumatt could be completed by December 12 in a deal that will also see Tuskys appoint Mr Shah’s replacement and a new chief finance officer (CFO).
“Under the terms of the proposed preliminary agreement, Tuskys shall among other things provide certain management services to Nakumatt, including procurement and inventory management. Robust governance structures will be implemented and independent directors and a new CEO and CFO appointed,” Nakumatt says in a report on a meeting it held with creditors and whose deliberations have been filed in court by the retailer’s lawyer James Kamau.
“The intention is for Tuskys to take up the majority stake of 51 per cent because that then gives them a measure of control. This preliminary arrangement, once it receives the nod of the regulator will entail, Tuskys taking over management of Nakumatt so that effectively you have good management, you have finances to operate and pay the obligations going forward.”
The proposal is also before the Competition Authority of Kenya (CAK), which must approve it before any action starts, according to the court papers.
Under the deal, Tuskys will take over the management of Nakumatt and its branches as well as decide how many Nakumatt branches to shut down in order to streamline the retail chain’s operations.
Nakumatt in the October 13 meeting with its creditors, whose minutes have been filed in court, revealed that it owes creditors between Sh30 and Sh40 billion in secured and unsecured debt.
Nakumatt refers to Tuskys in the documents as an investor, further indicating that the deal is a buyout and not a merger as earlier claimed by both retailers.
The troubled retail chain, which has been Kenya’s largest for many years, cites an internal business review conducted by consulting firm KPMG showing it can be turned around.
But Tuskys is also facing its own internal challenges, including opposition to the Nakumatt deal by one of its big shareholders, Yusuf Mugweru.
Mr Mugweru, who owns a 17.5 per cent stake in Tuskys, last month wrote to his siblings and co-owners claiming that he had been locked out of the deal and that he was opposed to it.
Other Tuskys shareholders are John Kago (10 per cent), Stephen Mukuha (17.5 per cent), Sammy Gatei (17.5 per cent), George Gachwe (17.5 per cent), deceased Mary Njeri (10 per cent) and Mary Njoki (10 per cent).
Nakumatt, however, assured creditors at the October 13 meeting that those who did not join the wind-up petition as earlier directed by the court would be prioritised once the retailer is ready to start reducing its debtload.
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Nakumatt’s lawyers, Mr Kamau and Kevin McCourt, also revealed at the meeting that the retailer has an informal agreement with its major lenders —KCB #ticker:KCB, Standard Chartered #ticker:SCBK, Diamond Trust Bank #ticker:DTK and Bank of Africa — to temporarily halt loan repayment as it tries to get back on its feet.
How much each lender is owed, was not however disclosed. NIC Bank #ticker:NIC (Sh42 million) and Guarantee Trust Bank (undisclosed amount) are the only lenders that have come out to claim loan repayments from Nakumatt.
The two lenders have joined the insolvency petition against Nakumatt to support its closure.
Mr Kamau told creditors that Nakumatt’s employees will have the first crack at any payments that come through once the retailer’s pockets receive funds, then landlords and finally suppliers and other creditors.