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Nakumatt moves goal post for share sale deal

Discussion in 'International Forum' started by Geza Ulole, Feb 1, 2010.

  1. G

    Geza Ulole JF-Expert Member

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    Posted Thursday, January 28 2010 at 19:34

    East Africa’s biggest retail chain Nakumatt Holdings is holding on for a $25 million funding from a yet to be named partner that could roll in this year. But talks for the release of the funds likely to reduce by 30 per cent the share holding of managing director Atul Shah and Hotnet Limited, a company associated with assistant minister for Transport John Harun Mwau, are dragging on.
    London-based private investment provider Satya Capital and Kingdom Holding Company of Saudi Arabia are the investment groups primed to snap up the stake in Nakumatt.
    According to plans by Nakumatt, money coming from the new partners will be channelled into building four more retail outlets in Kenya and three other shops in Uganda and Rwanda, increasing Nakumatt’s network to 21 outlets in east Africa. But is this the right strategy for Nakumatt? Will the aggressive expansion programme dry out the retailer’s liquidity?
    Mr Shah, the main shareholder of the retail chain, spoke with Business Daily writer JIM ONYANGO on the reasons for sourcing funds from externally and how the retail chain is fairing on in the face of low consumption by customers who have been hit hard by the increasing price inflation.
    It is public knowledge that Nakumatt intends to sell a 30 per cent stake to a strategic investor. Have you decided on the investor? If so, who? We are yet to decide on one particular investor. But we are in talks with two serious investors and intend to close the deal by the end of the first quarter or at the beginning of the second quarter.
    We started the talks last year, but there are a few loose ends that we are hoping to tie up before publicly announcing the deal.
    Isn’t the conclusion of the deal long overdue? Why is it dragging on?
    I’ve seen partnership negotiations that have even taken two years. We have only been in this negotiations for eight months. That’s not long to cause any concerns. We want to make sure that the deal is concluded well.
    But I can confirm to you that we are ready to take in the new partner. We can only marry one women at a time, this means we will only take in one partner who will inject the much needed equity capital.
    Of the two potential partners, which one are you likely to invite to take up a seat on your board? How much is that partner likely to put into the business?
    We are not disclosing names yet, but what I can tell you is that the deal is close to being concluded and putting out names could jeopardise it. We want to keep the identities of our potential investors secret for now. The new investor will put $25million into the business. The money will not go into the pockets of any of our shareholders. Specifically, this equity capital will go straight into our network expansion. We want to go to where our customers are. We want to increase our visibility in Kenya and across east Africa.
    We are still a long way from where we want to be, this means that we have to vigorously increase our internal capacity and exposure to our customers.
    You talk passionately about opening up new shops in Kenya, Uganda and Rwanda. Are you not biting more than you can chew? This rapid expansion may be your Waterloo as it is likely to eat into you cash base, putting the company into liquidity problems.
    That could be true, but we are not expanding blindly. Expansion has to be done cautiously.
    What we know is that everywhere we have opened a Nakumatt store we have managed to be successful.
    This is why we are banking on an external investor to put in the money. In our negotiations with the potential investors we have put it across that this money will not be pocketed by any of the directors, but we will put the new money directly into our branch network expansion programme.
    We have achieved what we set about to achieve, but we are still far from realising our dream. We have also changed lives as most businesses near our shops have also flourished.
    For example, in Nairobi we have been able to buy from jua kali people items such as utensils, metal boxes and jiko items which we then sell at our stores.
    Some of our stores also sell charcoal and this tells you that our business has also gone around benefiting the small business people who sell to us.
    What we have also noticed is that the local businesses have also improved their merchandise to meet international standards and to be like some of the goods that we import. You will want to know that we stock about 60 per cent of imported goods. The other items are sourced locally.
    Where are you planning to put up your new retail outlets and how much will this cost the company?
    This year we are ready to roll out four supermarket stores across Kenya. Two are ready to be opened in Diani, Mombasa and on Kiambu Road. But we are also completing a construction on Langata Road, near Bomas of Kenya, where we will also have another outlet.
    In East Africa, we are looking to acquire a supermarket in Uganda to add to our retail store in Kampala. We will also open a second shop in Kigali Rwanda.
    We intend to use all of the $25 million equity capital to open the new retail outlets.
    You seem to be focusing a lot on your Uganda and Rwanda operations. How are the two markets treating products from Kenya?
    Rwanda people have supported us well. They have told us that by opening a Nakumatt store there we took to them what they were missing.
    Similarly, our retail outlet in Kampala is emerging to be one of the best stores in that country and people are flocking in. Besides, our stores in Kampala and Kigali operate for 24 hours a day and we intend to repay their loyalty by opening more branches out there.
    We are focusing on the Uganda and Rwanda markets because we believe in the East African Community. We want this region to open up for the free flow of goods, manpower and capital. Nakumatt has just started it off, we want other companies to cross the borders and operate in the five countries of the East African Community.
    How is the retail business doing in terms of sales? Consumers have faced high price inflation as a result of global economic recession and slow economic growth in Kenya. Have you noticed any low sales as a result of the economic difficulties faced by consumers?
    It’s true that towards the end of 2008 and up to the first half of 2009 things were difficult for our customers. We saw reduced sales, but this has since picked up and we project that we will have increased sales in 2010.
    The economy can only get better. Our leaders must now guide this country towards the right direction that will lead Kenyans into prosperity.
    We know our leaders play politics a lot but we want constructive politics that can educate Kenyans.
    The media too has a big role to play here to ensure that Kenyans are aware of economic issues and how they can make their lives better.

    http://www.businessdailyafrica.com/Company%20Industry/-/539550/851442/-/view/printVersion/-/6pu2bwz/-/index.html
     
  2. G

    Geza Ulole JF-Expert Member

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    There were some dudes here arguing who is the main shareholder for Nakumatt, i guess they have the answer now!
     
  3. Smatta

    Smatta JF-Expert Member

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    This is what is important to me, not what you have highlighted about the Shahs. I think you miss the big picture, stop being attracted to the side shows and concentrate on what is beneficial to all of us.
     
  4. G

    Geza Ulole JF-Expert Member

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    What if spending capacity is lower in Kenya and other EA countries, why crossing the border?
     
  5. Smatta

    Smatta JF-Expert Member

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    Ati spending capacity of East Africa is low, are you serious?
     
  6. G

    Geza Ulole JF-Expert Member

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    where did you learn english my friend? i said what if ? since from economical principles crossing border takes a vibrant market that can yield and so far with the exception of Uganda the rest seem not paying that's why you see fewer companies going out of Tanzania to Kenya! that's my opinion and according to GDP growth indicators!
     
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