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The founders of Nivas are eyeing $5.8 billion as foreigners take control
Friday 07 July 2023
Naivas supermarket on Muindi Mbingu Street as pictured on July 2, 2023. Image | Denis Onsongo | NMG
The family of Peter Mokoha Kaju, founder of Naivas, is set to sell an additional 11 percent stake in the company for $41.7 million (Sh5.8 billion) in a deal that will see foreign investors seize ownership of Kenya’s largest supermarket. series.
This will be the third time that Mukuhas has sold their shares in Naivas, which has become a magnet for investors on the back of profitability and market share growth.
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The latest proposed deal was disclosed by Mauritius-based IBL Group, part of a consortium that bought a combined 40 percent stake in Naivas last year for $151.97 million (NIS 21.4 billion at current exchange rates).
The deal, if it goes through, means Kenya’s three largest stores will now be controlled by foreigners.
“The company … will subscribe to additional shares in Mambo Retail Limited,” IBL said in a statement to its investors.
“Mambo Retail Limited will use the proceeds from the share placement to acquire an additional 11 per cent stake in Naivas International… the leading retail chain in Kenya which will result in Mambo Retail Limited owning a 51 per cent stake in Naivas International Limited”
Mambo Retail is the investment vehicle through which IBL, the French fund Proparco and the German fund DEG currently hold a 40% stake in Naivas International, which in turn wholly owns the operating subsidiary Naivas Limited.
The proposed deal would see Mokoh’s interest in the supermarket chain drop from its current 60 percent to 49 percent, making them a minority shareholder.
The family’s investment vehicle – the Gakiwawa Family Investments – has dumped its shares in recent years in deals worth billions of shillings, bucking the trend of local founders of other retail giants such as Nakumatt Holdings and Tuskys holding onto stakes only to see their fortunes evaporate as those ventures collapse.
Mukuhas used to own 100 percent of the Naivas until 2020 when they sold a 31.5 percent stake for Sh6 billion to a consortium including the International Finance Corporation (IFC), DEG, private equity firms Amethis and MCB Equity Fund.
The money was spent supporting the growth of retailers across the country, with Mukuhas ownership dropping to 68.5 per cent but becoming more valuable as the supermarket operator experienced profitable expansion.
In June last year, the IBL-led group reached a deal to buy the 31.5 percent stake held by IFC and its co-investors at a cost of $119.68 million (Sh16.8 billion).
The group also acquired an additional 8.5 percent stake in Mukuhas for $32.29 million (Sh4.5 billion), the first time the family had capitalized on its investment through a share sale.
The family is expected to get at least NIS 5.8 billion from the new deal, based on last year’s deal that valued the retailer at $379.9 million (NIS 53.5 billion at current exchange rates).
This makes it one of the most valuable private companies in Kenya, with its valuation surpassing the market capitalization of BAT Kenya (44 billion shekels) and Stanbic Holdings (46.6 billion shekels).
It was not immediately clear if IBL partners DEG and Proparco would also provide new capital that would be used to purchase the additional shares from Mukuhas.
IBL currently holds an effective stake of 26.32 percent in Naivas through its majority ownership of 65.8 percent in Mambo Retail.
It is followed by Proparco and DEG which have indirect retailer share of 8.29% and 5.39% respectively.
DEG reinvested in Naivas along with IBL immediately after its purchase with the first investors – the International Finance Fund and private equity funds.
The deal underscores IBL’s confidence in Naivas’ future prospects, with the retailer the most significant of a series of investments it has made in Kenya, including the purchase of a solar energy company (Equator Energy) and a pharmaceutical distributor (Harley’s).
Naivas profits grew to Sh2 billion in the nine months ending in March, according to IBL disclosures.
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Previous disclosures showed the retailer reported sales of Sh65.1 billion in the year ending June 2021 when it made a net profit of Sh2 billion, representing a net margin of 3.18 per cent.
This was an improvement over the previous year when it generated net income of Sh1 billion on sales of NIS 54 billion, a net margin of 1.9 percent.
Established in 1990, Naivas has grown to be the largest supermarket chain in the country with over 84 stores and employing 8,000 people as of June 2022.
Its growth has come amid stumbles by rivals such as Nakumatt Holdings, Uchumi Supermarkets and Tuskys, which have gone bankrupt due to too much debt or mismanagement.
Other competitors such as Massmart and Shoprite in South Africa have recently closed down operations after failing to gain traction in the competitive formal retail market.
Carrefour and Quickmart are among the supermarket chains that have continued to expand along with the dominant Naivas.
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