Nakumatt’s court-appointed administrator Peter Kahi, in a report to creditors, says he is implementing a management agreement already signed with Tusker Mattresses Limited even before he took over running of the ailing retailer.
Tuskys, as per details of the agreement, is charging a management fee of one per cent of sales.
If deemed to have breached the law, the retailers could be fined 10 per cent of the revenues earned during the life of the irregular arrangement.
Tuskys Supermarkets is facing fresh sanctions from the competition watchdog for signing a deal to finance its financially troubled rival, Nakumatt, without approval of the regulator.
Nakumatt’s court-appointed administrator Peter Kahi, in a report to creditors, says he is implementing a management agreement already signed with Tusker Mattresses Limited even before he took over running of the ailing retailer.
The deal involves Tuskys providing Sh650 million to support Nakumatt’s operations while another sum of between Sh1.5 billion and Sh3 billion is to go towards restocking branches.
Tuskys, as per details of the agreement, is charging a management fee of one per cent of sales.
Mr Kahi in his report says the two retailers do not require approval of the Competition Authority of Kenya (CAK) to actualise, a claim that the watchdog, however, says could attract penalties for the two supermarkets.
“We shall follow up on the contents of the report and if we find that the partnership is live without our consent, the parties shall be liable to the penalties stipulated in the law,” said the CAK director-general Wang’ombe Kariuki in an interview Friday.
If deemed to have breached the law, the retailers could be fined 10 per cent of the revenues earned during the life of the irregular arrangement. The directors of the two firms also face a jail term of five years, a fine of Sh10 million or both.
Nakumatt and Tuskys late last year lodged an application with the CAK seeking to merge, in a curious show of support by industry rivals.
The regulator declined the application noting that the shareholding of the two firms was not changing and therefore they should have instead applied for an exemption.
Mr Kariuki said the retailers filed their submissions seeking the exemption, adding that the regulator is in the process of evaluating it.
Mr Kahi, in his report, however, states that he met the CAK and explained the position that approval is not a prerequisite for the management deal to be effected.
“They (Nakumatt and Tuskys) are jointly operating an escrow account with the administrator for paying for the supplies. This agreement is key to the success of any turnaround efforts,” said Mr Kahi.
