The family of Peter Mukuha Kago –the founders of supermarket chain Naivas— has pocketed an estimated $32.29 million (Sh3.8 billion) from the sale of an 8.5 percent stake to a consortium of international investors in a transaction that values the retailer at Sh45.6 billion.
New disclosures have revealed that the family joined the International Finance Corporation (IFC), German fund DEG, and private equity firms Amethis and MCB Equity Fund to sell a combined 40 percent stake in the country’s biggest supermarket for a record-setting $151.97 million (Sh18.25 billion).
Finer details of the transaction were not disclosed during the June announcement.
But Mauritius-based conglomerate IBL Group, which led the buying consortium, has now revealed the terms of the just concluded deal, including the fact that the founding family also sold an 8.5 percent stake.
The 8.5 percent stake is valued at $32.29 million (Sh3.8 billion) based on the $100 million (Sh12 billion) that IBL disclosed as the price it paid for acquiring a 26.32 percent ownership in the supermarket chain.
The fortunes of the Mukuha family contrast with those of others associated with family-owned supermarket chains that have either collapsed or are struggling to remain afloat.
Both the Atul Shah family and Mukuhas’ relatives – owners of Nakumatt Holdings and Tuskys supermarket respectively — lost opportunities to reap billions of shillings in stake sales after they rebuffed suitors.
Cash-strapped Tuskys, whose branches have dropped from 53 to less than seven, is struggling to remain afloat while Nakumatt closed shop in 2020 after it was unable to pay debts following a failed rescue attempt.
Heirs of the Mukuha empire, including Martha Waithera, Grace Muthoni, and David Kimani, hold their shares through the investment vehicle Gakiwawa Family whose stake in Naivas has now dropped to 60 percent.
The IBL-led consortium on the other hand bought the 40 percent stake in the business through an investment vehicle called Mambo Retail.
“On 10 August 2022, Mambo Retail acquired 40 percent stake in Naivas International, representing all shares previously held by Amethis Retail Limited and … part of the shares held by Gakiwawa Family,” IBL said in a circular to its shareholders.
DEG, IFC, and the PE firms bought a 31.5 percent interest in Naivas in 2020 through the investment vehicle Amethis Retail Limited for Sh6 billion, and the money was spent on fuelling the retailer’s growth across the country.
The deal diluted the family’s ownership to 68.5 percent.
The institutional investors announced in June that they reached an agreement to sell their entire stake to the consortium led by IBL.
The disclosures show that the institutional investors reaped large profits on their short-term investment, which lasted about two years.
The firms bought the 31.5 percent stake for Sh6 billion and have sold it for $119.68 million (Sh14.37 billion), more than doubling their money in two years.
IFC had invested $15 million, equivalent to Sh1.8 billion at current exchange rates.
DEG, which had invested $10 million (Sh1.2 billion), took the cash it received and plowed it back into Naivas as part of the IBL-led consortium.
As IBL invested $100 million (Sh12 billion) to acquire the 26.32 percent stake, DEG put in $20.47 million (Sh2.45 billion) in exchange for a 5.39 percent ownership.
French fund Proparco invested $31.5 million (Sh3.7 billion) for an 8.29 percent stake.
“IBL’s equity contribution towards Mambo Retail is $100 million … and represents an effective stake of 26.3 percent in Naivas International. IBL’s partners in Mambo Retail are Proparco and DEG,” the Mauritius-based conglomerate said.
The deal values Naivas at $379.9 million (Sh45.6 billion), making it one of the most valuable privately held companies in Kenya.
Based on the deal price, the retailer ranks above the market capitalisation of most firms listed on the Nairobi Securities Exchange, including BAT Kenya, I&M Group, and Stanbic Bank.
Naivas, however, has much smaller earnings compared to the listed firms, revealing the razor-thin margins in the supermarket business.
The retailer reported sales of Sh65.1 billion in the year ended June 2021 when its net profit stood at Sh2 billion, representing a net margin of 3.18 percent, according to the disclosures.
This was an improvement from the prior year when it made a net income of Sh1 billion on sales of Sh54 billion, amounting to a net margin of Sh1.9 percent.
Established in 1990, Naivas has grown to become the largest supermarket chain in the country with more than 84 stores and 8,000 employees as of June.
The Mukuha family and the institutional investors own Naivas Limited –the operating company— through the investment vehicle Naivas International.
The new investors are bullish about the retail chain’s long-term prospects.
“IBL views the investment in Naivas International as a long-term strategic partnership, in line with IBL’s investment principles and strategic intent to establish a long-term presence in the East African region,” the multinational said.
“IBL focuses on sectors of strategic fit where it can contribute to equity partnership and actively support growth strategies by leveraging on its core operating capabilities.”
For IBL, the acquisition of a minority stake in Naivas marks the expansion of its conglomerate business model that spans 18 countries.
The company, which is listed on the Mauritius Stock Exchange, employs 25,000 people and has operations in agriculture, energy, distribution, logistics, engineering, financial services, and hospitality among others.
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