Uchumi Supermarkets CEO Jonathan Ciano and Tanzania based Quality Group
CEO Yusuf Manji. The acquisition is part of the supermarket’s planned
expansion in Tanzania over the next eight months. PHOTO | FILE | NATION
MEDIA GROUP
Uchumi Supermarket has acquired a store in Tanzania as part of
its aggressive expansion plan in that market. Chief executive Jonathan
Ciano said acquisition of the outlet from Dar es Salaam-based Sifamart
Supermarkets was concluded last week in a deal financed by debt.
Uchumi
is yet to decide whether to take over a second branch operated by
Sifamart in the same city. The acquisition is part of the supermarket’s
planned expansion in Tanzania over the next eight months, when it
expects to have opened a total of six stores in Dar es Salaam, Morogoro,
Arusha and Mwanza.
The latest expansion increased Uchumi’s branches in Tanzania to five.
“Uchumi
concluded closely guarded discussions with the management of Sifamart
allowing Uchumi to take over the operations … effective November 1,
2014,” Mr Ciano said.
COST OF ACQUISITION
“The
acquisition was supported by our financiers who have leased the
supermarket equipment to Uchumi and our esteemed suppliers who have
enabled the working capital to the tune of TSh1.02 billion (Sh53
million),” Mr Ciano said.
He declined to reveal the
acquisition cost and whether the transaction included the premises and
inventory. Uchumi is reviewing its staffing needs and the qualifications
of workers inherited from Sifamart to inform how many will be absorbed.
Tanzania’s Fair Competition Commission could not be reached for comment.
This
latest acquisition comes soon after rival Nakumatt Holdings bought out
South African retail giant Shoprite in Tanzania at a cost of Sh3
billion. The acquisition involved three Shoprite sores located in Dar es
Salaam and Arusha.
Reliable sources told the Business Daily
that Nakumatt is also eyeing two stores in Uganda owned by the South
African firm, which appears to be exiting the regional retail market.
Shoprite’s exit from Tanzania was blamed on regulatory actions, with the
government piling pressure on the retailer for importing most of its
products instead of supporting Tanzanian suppliers.
Uchumi said its Tanzania branches will not be importing products from Kenya.
“All
products sold in Uchumi stores in Tanzania are locally procured from
Tanzanian-based entrepreneurs,” the firm said in a statement.
Uchumi,
with 37 stores in Kenya, Uganda and Tanzania, plans to venture into
Rwanda and Burundi in the near term. Expansion into the new markets is
to be funded through an upcoming rights issue targeting to raise Sh895
million.
The cash call, which opens this coming Monday, is priced at Sh9 apiece.
CASH CALL
The
firm’s stock closed at Sh8 yesterday, indicating that the rights issue
is set at a 12.5 per cent premium on the prevailing market rates.
Shareholders are entitled to three new shares for every eight held.
The
cash call was approved by shareholders in December 2012 and its delay
has seen Uchumi struggle with supplier debts and stock-outs, forcing the
retailer to turn to borrowing for working capital.
Its
latest debts include a Sh600 million one-year loan from KCB at an
interest rate of 18 per cent, a move that will see the retailer incur an
extra Sh108 million in finance costs.
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