Tuskys sibling in court to avert stake sale row

One of the significant investors in supermarket chain Tuskys, Stephen Kamau, has obtained court orders allowing the cash-strapped retailer to fast track a shareholder meeting to approve the injection of new capital.

The move is also seen as a manoeuvre to pre-empt obstacles to the planned meeting by another significant shareholder, Yusuf Mugweru, who has been wrangling with his siblings in the family-owned business.

Mr Kamau told the High Court in Nairobi that Orakam Holdings, the that Orakam Holdings, the investment vehicle which owns Tuskys 100 percent, needs to convene a meeting within 48 hours to save the retailer from collapse.

This also offered the majority shareholders a smaller window to get a speedy approval for an equity deal and avoid derailing the buyout transaction.

“That prayer 1 is granted save that the applicant shall issue a 7 (seven) day notice of the intended meeting,” Justice Francis Tuiyott said in the orders issued yesterday. The judge also allowed Orakam to hold the meeting via virtual means.

But Mr Kamau’s request that the company be allowed to continue holding such meetings on short notice for as long as Tuskys remains in crisis was rejected. The judge also declined to issue an order validating the meetings, meaning that the resolutions will stand on the strength of the company’s internal rules and the relevant legal provisions.

Mr Mugweru, with a 17.5 per cent stake in Tuskys, reckons his brothers are yet to disclose the whereabouts of some Sh1.6 billion that was the subject to a court suit and is also demanding a forensic audit of the retailer’s accounts covering the past eight years.

Tuskys is seeking to sell a majority stake to a consortium made up of a private equity firm and an undisclosed foreign retailer as part of efforts to raise cash to pay suppliers and win back their confidence.

The court said it was also ready to listen to any shareholder objecting to the planned meeting. Such an objection will, however, be more difficult as it could take days or weeks to litigate.

By going to court first, Mr Kamau blocked other potential dissenting shareholders from simply obtaining ex-parte orders, which are issued without the other party being made aware of the instructions, stopping the meeting.

“That the 21 days’ notice period prescribed in the Memorandum and Articles of Association of the company and the Companies Act, 2015 is not tenable in the circumstances since the general meeting of the shareholders has to be convened urgently in an effort to rescue Tusker Mattresses Limited,” Mr Kamau told the court.

The prospective equity investors want all the Tuskys’ seven shareholders to agree and make legal commitments to the sale of a majority stake in the company.

Sources familiar with the share sale deal told the Business Daily that the potential investors are concerned about committing resources to a deal that could be scuttled by insiders.

They are also fretful about the possibility of ending up with an aggrieved minority shareholder who could rock the boat from within. The jitters are based on previous fallouts that saw Mr Mugweru in 2018 scuttle a merger deal between Tuskys and then cash-strapped Nakumatt, which has since collapsed.

For months now, shoppers have complained of missing essential goods on the retailer’s shelves, suggesting that some suppliers are severing ties with the company amid a cash crunch, which has triggered dissolution court suits and auctioneers’ actions over unpaid rent.

Tuskys had earlier estimated that it needed at least Sh2 billion to survive in the short term as piling debt led to supplier defections, stock-outs and closure of some stores.

It remains to be seen whether the retailer will raise enough cash and fast enough to remain in business. The company has lost several stores in recent weeks as landlords enforced their rent collection.

Nairobi Securities Exchange-listed ILAM Fahari I-Reit on Monday, for instance, closed Tuskys’ branch at its Greenspan Mall in Nairobi over a Sh30 million rent default.

“Tuskys started showing signs of distress as a tenant earlier in the year with regards to the tenant’s obligations. As the Reit Manager, we have been in discussions with them to reach an amicable payment plan and warrant their continued operations at the mall,” Fahari said in a statement. Mr Kamau, Mr Mugweru, Sammy Gatei and George Gachwe each own a 17.5 percent stake in Tuskys, according to disclosures in a previous court case.

John Kago, Mary Njoki and the estate of Mary Njeri were listed as holding a 10 percent stake each. Mr Kamau’s lawyer, Ecrone Omulloh, told the court that Tuskys’ shareholders needed to meet to approve new capital injection from an unnamed investor.

“That the board of directors has identified a potential investor and now requires the mandate of the shareholders to consider and approve the proposed investments by the investor,” Mr Omulloh said.