The merger will result in the formation of a single entity that will take over all their assets and liabilities.
Other parties can only come in as debt investors after the merger.
Nakumatt has faced bankruptcy suits in recent months after a delay in getting new capital saw it fail to pay its employees, suppliers and lenders.
Tuskys Supermarket chief executive Dan Githua has said the proposed merger with Nakumatt will see the two retail chains operate under one management with the owner-families remaining the principal shareholders after the transaction.
“The two businesses will collapse into one. But before the eventual merger there’s going to be a process of dealing with the liabilities,” said Mr Githua in an interview.
Nakumatt has faced bankruptcy suits in recent months after a delay in getting new capital saw it fail to pay its employees, suppliers and lenders.
A tie-up with Tuskys, whose details first emerged on Monday, is the latest scramble to save what has been Kenya’s biggest retail chain.
“These confidential discussions are continuing and although the engagement has been positive and good progress has been made, it is important we acknowledge that a formal agreement is yet to be reached and will be subject to notification and approval by regulators and lenders,” the retailers said in a joint statement.
The family-owned companies, whose founders Maganlal Shah (Nakumatt) and Joram Kamau (Tuskys) traded business favours in their infancy decades ago in Nakuru, said they are exploring potential for “co-operation and business integration.”
The merger will result in the formation of a single entity that will take over all their assets and liabilities.
Mr Githua added that other parties can only come in as debt investors after the merger.
Valuation of the two businesses is still being worked out and the merger process could take more than a year, said the Tuskys boss.
The talks leaked before the companies notified the Competition Authority of Kenya (CAK) of their intention.
Regulatory approval
A merger of the firms will have to get the approval of the regulator given its impact on the retail sector.
Their combination will result in the largest retailer in the country, with rivals such as Naivas and Uchumi supermarkets far behind.
CAK will assess whether their union will limit competition to the detriment of consumers and suppliers, among other interested parties.
Tuskys, which is presumed to be stronger financially than Nakumatt, is expected to do the heavy lifting in the early phase of the merger, including ensuring that the latter accesses stock from suppliers.
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