Naivas gets Sh6bn for stake sale to private equity funds

A section of the Naivas Capital Centre outlet. PHOTO | SALATON NJAU | NMG 

By VICTOR JUMA
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Summary

• IFC, private equity firms Amethis and MCB Equity Fund and German sovereign wealth fund DEG teamed up to acquire the minority stake, with the deal set to fuel Naivas’ expansion across the country.
• At Sh20 billion, Naivas’ valuation beats the market value of all but one company listed on the Commercial and Services segment of the Nairobi Securities Exchange, including Uchumi Supermarkets (Sh128 million) and Scangroup (Sh4.8 billion).
• The new capital injection in Naivas is earmarked for expansion in the highly competitive local supermarket business that has attracted major players, including the Majid Al Futtaim-backed Carrefour franchise as well as South Africa’s Shoprite and Game.

Supermarket chain Naivas has raised Sh6 billion from the sale of a 30 per cent stake to a consortium of investors, including the International Finance Corporation (IFC), valuing the retailer at Sh20 billion.

The amount paid in the deal, one of the largest in the regional retail space, is disclosed in transaction documents seen by the Business Daily.

IFC, private equity firms Amethis and MCB Equity Fund and German sovereign wealth fund DEG teamed up to acquire the minority stake, with the deal set to fuel Naivas’ expansion across the country.

The breakdown of the stakes held by the institutional investors was not immediately clear.

In separate disclosures, however, IFC said it invested $15 million (Sh1.6 billion) while DEG said it provided $10 million (Sh1 billion).

Amethis and MCB Equity Fund are yet to reveal the size of their participation in the deal.

“Naivas is majority-owned by the Mukuha family who as part of this transaction will dispose part of their shareholding to a special purpose vehicle owned by IFC,

Amethis and other co-investors,” IFC said ahead of the deal’s conclusion on February 25.

“The Mukuha family will remain in the business as the main shareholders.”

At Sh20 billion, Naivas’ valuation beats the market value of all but one company listed on the Commercial and Services segment of the Nairobi Securities Exchange, including Uchumi Supermarkets

(Sh128 million) and Scangroup

(Sh4.8 billion).

EXPANSION

Kenya Airways

is the largest firm in the segment where Naivas would seat if it were listed at the Nairobi bourse.

The new capital injection in Naivas is earmarked for expansion in the highly competitive local supermarket business that has attracted major players, including the Majid Al Futtaim-backed Carrefour franchise as well as South Africa’s Shoprite and Game.

The Sh6 billion is nearly twice what an investor would have paid for a similar stake in 2013 based on the valuation of Naivas by Massmart, a South Africa-based subsidiary of retail giant Walmart.

Massmart sought to buy a 51 per cent stake in Naivas for Sh3 billion, but the deal collapsed following a shareholder row in the family-owned supermarket.

The Massmart deal valued Naivas at Sh5.88 billion, meaning the Kenyan retailer has increased its value nearly four times over the seven years, reflecting the growth and financial stability of the supermarket in a sector where top local chains such as Nakumatt struggled to remain afloat.

Nakumatt was dissolved in January after it failed to clear more Sh30 billion owed to suppliers, landlords and other creditors.

While Naivas has raised growth capital, its main rival Tuskys is fundraising to avoid bankruptcy.

Tuskys says it needs Sh2 billion to survive in the short term and that it has received interest from several unnamed investors, including a private equity firm that has existing operations in the retail business.

Such a suitor is expected to benefit Tuskys from the supply of both new capital and technical expertise with a large share of the payout being used to settle supplier debt and bank loans.

Carrefour is also gearing up for expansion. South Africa’s Standard Bank Group recently lent Sh3 billion to Dubai-based conglomerate Majid Al Futtaim to expand its supermarkets business in Kenya through the Carrefour franchise.

Carrefour Kenya has emerged as one of the major players in the local retail market, having launched operations in 2016 at The Hub in Karen, Nairobi.

It has grown rapidly since then and now has seven stores, including the branches at Nairobi’s Two Rivers Mall, Thika Road Mall, The Junction and Sarit Centre.

The retailer has been attracting shoppers through a mix of loyalty programmes and aggressive discounts on a wide array of merchandise. Naivas also plans to open more stores across the country. It currently has about 60 stores, half of which are in the greater Nairobi region. “The new capital will enable Naivas to develop its store-based services further and to expand its online offering,” DEG said in a statement.

“Investment will also be made in supply chains and business organisation to further enhance the quality of service and products,” the institutional investor added, noting that Naivas already employs 6,000 people.

The supermarket chain offers a broad range of products, including fast-moving consumer goods, clothing, furniture and electronics.

“In recent years Naivas has started to take a new approach in its supermarkets, adding significantly more fresh products to its lines. Over 90 per cent of goods offered now come from local and regional suppliers,” DEG said.

Besides the capital injection, Naivas will also receive food safety advisory services from IFC. “IFC will provide a food safety advisory programme that will ensure that the company complies with the Global Good Agriculture Practice (GGAP) that is more stringent than local standards,” IFC said.