Category Archives: Nakumatt

M&A Moment: March 2018

Various merger/acquisition (M&A) deals in the last few weeks and months in East Africa since the last update.

Banking and Finance: Finance, Law, & Insurance M&A

Centum Investments is selling its shareholding in GenAfrica Asset Managers to Kuramo Capital LLC, an independent investment management firm based in New York City with offices in Nairobi and Lagos, and registered as an investment advisor by the Securities and Exchange Commission (“SEC”).

Centum sold 25% of Platcorp Holdings to  Suzerian Investments a consortium of the Platcorp management team (platinum credit and premier credit) which provides emergency loans to individuals in  Kenya Uganda Tanzania while Premier offers working capital loans to companies – at a 31% return.

AfricInvest, a leading pan-African mid-cap-focused private equity firm invested in Britam Holdings Plc (Britam),  taking up a 14.3% stake. The investment was made in partnership with DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG), The Dutch Development Bank FMO, and Proparco, a subsidiary of Agence Française de Développement (AFD), focused on private sector development.

Hamilton Harrison & Mathews Advocates (HH&M), one of Kenya’s oldest and largest law firm has entered into an agreement to combine with Dentons, the world’s largest law firm. Upon regulatory approval, HH&M will become part of Dentons, which is combining with seven elite firms in Africa, the Caribbean and South East Asia.

The Competition Authority of Kenya has authorized the proposed acquisition of control in AON Kenya Insurance Brokers by Extologix Proprietary through Heartland Holdings.

BitPesa, the first and largest blockchain payments platform for Africa and Europe, announced their acquisition of TransferZero, an international, online money transfer platform that specializes in sending money to consumers and companies in 200 countries using over 50 different currencies.

Mastercard has completed its acquisition of mobile payments technology company Oltio from Standard Bank Group. The acquisition builds on Mastercard’s longstanding relationship with Oltio’s technology enables consumers to authenticate Masterpass digital wallet purchases in South Africa using their bank PIN and mobile phone.

DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, is investing EUR 4 million in M-BIRR, a cashless money transfer and payment service in Ethiopia to improved access to banking services in Ethiopia on a wide scale. Other investors include the European Investment Bank (EIB). The Finnish development finance company Finnfund has been a shareholder in M-BIRR since as early as 2012 which is inspired by the success story of the Kenyan provider M-PESA.

The Competition Authority authorized the proposed acquisition of 100% of the issued share capital of Youjay’s Insurance Brokers by I & M Insurance Agency.  I&M Bank, through its subsidiary, I&M Insurance Agency, has completed the acquisition of Youjays Insurance Brokers. Founded in 1987, Youjays deals in life and non-life products and has 400 customers and has an insurance premium portfolio of Kshs 400 million.

Customers of Chase Bank were given an update by the Central Bank (CBK) and the Kenya Deposit Insurance Corporation (KDIC) on the ongoing takeover of selected assets and liabilities of their  bank by State Bank of Mauritius (SBM).

 

Food & Beverage M&A

A South-African based private equity fund has invested Sh404 million ($4 million) to acquire an undisclosed stake in Kenyan fast food chain Big Square. Uqalo says its investment will expand its footprint from the current nine stores to 30 over the next four years. Uqalo, which targets investments located in Kenya, Ethiopia and Nigeria, is primarily funded by Hong Kong-based supply chain and logistics conglomerate Fung Group and its strategy is to acquire minority stakes by investing between Sh202m and Sh506m ($2m and $5m) in “mature businesses” through equity or convertible debt (via Business Daily).

The Competition Authority approved the proposed acquisition of 100% shareholding in Nairobi Java House limited by Star Foods Holding

Wow Beverages  has made an application to enter into exclusive import arrangements with specified international and local manufacturers and suppliers of ‘premium’ wines and spirits in Kenya – from Gallo Vineyards Inc. trading as E&J Gallow Winery Europe, Vina San Pedro Tarapasca S.A, Felix Solis Avantis S.A, Afrique Interlink (PTY), Interlink (PTY) Limited, Edrington Group Limited and Tradall S.A (Bacardi-Martini Group).

Seaboard has made a low offer to buy out other minority shareholders of Unga.

The Kenya Tea Development Agency (KTDA) Chebut factory is set to take over management of 260 acres of mature tea owned by the Nandi county government after the conclusion of ongoing negotiations.

Kenyan billionaire David Langat has acquired one of the largest tea farm in Tanzania in a deal that puts his company as one of the single largest tea producers in East Africa. Langat is thought to have paid a British firm, Rift Valley Corporation, close to Sh6 billion ($60 million) for a controlling stake, 99 per cent, in Mufindi Tea and Coffee Limited, Rift Valley Tea Solutions Limited and Kibena Tea Limited. The businessman owns Koisagat Tea Estate in Nandi and Kapchepet tea factory that processes CTC tea for export under his company D L Koisagat. He also runs Selenkei Investments Ltd, a company that generates electricity from solar energy plus the imposing Nyali Centre in Mombasa County as well as the Sunrise Resort in the same county.

Carnivore owner Tamarind acquires Kengeles: The Competition Authority has approved the deal with a notice that “The merger will not affect competition negatively; and the combined turnover of the parties for the preceding year, 2016, was Sh1,224,757,242. However, the target had a turnover of Sh94,067,983, which is less than Sh100 million, and therefore, the transaction meets the threshold for exclusion under the Merger Threshold Guidelines” (via the Business Daily).

Logistics, Engineering, & Agri-Biz M&A

Ascent Rift Valley Fund (ARVF), a leading SME Private Equity Fund investor will acquire a majority stake in Auto Springs East Africa, a Limuru-based factory that produces a wide range of products for the motor assembly and vehicle spare parts industry. It will be done in a partnership deal with SFC Finance.

Sendy, an app-based on-demand delivery services platform operating across Kenya, has completed a Series A investment round, led by DOB Equity. DOB Equity will invest alongside CFAO, member of the Toyota Group, and other private investors. DOB Equity says that the new funds will enable Sendy to increase their platforms’ service offering. This includes adding more delivery vehicles to their platform, increasing their coverage area, expanding the sales and technology team, and preparing for future expansion into neighboring countries in East Africa.

The owners of flower farm Karuturi Limited have secured an investor to inject fund into their business as they fight to save their priced asset from being auctioned by CfC Stanbic over Sh1.8 billion loan default. The firm in a statement said that it has reached an agreement with Phoenix Group for a ‘blend of debt and equity’ which will help it to meet its current debt obligations and restart its operations (Via Business Daily)

Ethiopia acquires 19% in Berbera Port becoming a strategic shareholder; UAE’s DP World has 51% while Somaliland gets 30% following the agreement being signed.

Trading on Express Kenya shares has resumed at the Nairobi Securities Exchange (NSE) after a three-month suspension following a takeover bid by the firm’s CEO Hector Diniz. Diniz Holdings, an investment firm, has bid to acquire the 38.36% stake held by other shareholders other than its affiliates for Sh5.50 a share. (Via Business Daily).

The Competition Authority authorized the proposed acquisition of the entire issued share capital of Trillvane Ltd by Kuehne+ Nagel limited.

The Competition Authority authorized the proposed acquisition of Carzan Flowers (Kenya) limited by Star Bright Holdings.

The Competition Authority authorized the proposed acquisition by Diamond (bc) b.v. of the Diversey Care division of Sealed Air corporation (“sealed air”) and of Sealed Air’s food hygiene and cleaning business within its food care division.

The Competition Authority authorizes the proposed acquisition of 51% shareholding in Mavuno Fertilizers Limited by Omya (Schweiz) Ag.

Trans Miller Limited carrying on the business of food processing, packaging and distribution and other related agri-business activities, situate at L.R. No. 4953/1185, Thika, have been sold and transferred by the transferor to Tahuna Limited, who will carry on the said business of manufacturing under the name and style of Tahuna Limited.

Funguo Investments Limited has acquired a majority – 51% stake in Feastfoods Processors Limited, a food processing company that has been set up to manufacture fruit juice puree and concentrates in Kwale County (via Business Today)

The Competition Authority of Kenya excludes the proposed acquisition of 51% of the issued share capital of Ess Equipment Kenya Limited by Vronbisman Limited from the provisions of Part IV of the Act due to the following reasons as the acquirer does not operate in Kenya and the targets turnover for the preceding year 2017 was KSh. 79,314,330 and therefore, meets the threshold for exclusion under the merger threshold guidelines.

Airline/ Oil/Energy/Mining M&A

Kenya Airways PLC, KLM Royal Dutch Airlines (KLM) and Societe Air France S.A (Air France) have made an application under section 25 (1) of the Act for the exemption of their proposed Agreement of Accession and Amendment to Joint Venture Agreement (proposed Amended JV) from the provisions of section• A of Part III of the Act. The application for exemption is for an indefinite period (as long as the amended N Agreement remains in force).1. The proposed Amended N agreement provides as follows —(a) the inclusion of Air France as a party to the Joint Venture Agreement (original JV agreement) between Kenya Airways and KU* and(b) that all references to KLM in the original JV be construed as a reference to both KLM and Air France.

There has been an ownership change at Safarilink as ALS Limited, one of the shareholders of the firm, sold its entire to Bridges Limited, a Ramco Group affiliate, and an existing shareholder. As a result of this private transaction, Captain Aslam Khan of ALS relinquished his position of chairman with Safarilink’s owners settling on Mr. Ngunze to steer the airline’s board (via Business Daily)

Ethiopian Airlines, the largest Aviation Group in Africa announced that it has finalized shareholders agreement with the Government of Zambia for the re-launch of Zambia Airways. The Government of Zambia will be the majority shareholder with 55% and Ethiopian will have 45% stakes in the airline – and this comes after another consolidation at Ethiopian.

Base Resources announced that it reached  agreement with World Titane Holdings whereby Base Resources will acquire an initial 85% interest in the wholly owned Mauritian subsidiaries of World Titane, which between them hold a 100% interest in the Toliara Sands Project in Madagascar. Base Resources will acquire the remaining 15% interest, with a further US$17 million payable on achievement of key milestones, as the project advances to mine development. The acquisition is to be funded by the A$100 million share offer currently underway, refer below for further details. Completion of the acquisition is expected to occur in late January 2018.

Investec Asset Management through its Africa Private Equity increased its investment in Mobisol with consortium partners the IFC and FMO. Mobisol, headquartered in Berlin deals with the energy demand from off-grid households and has operations in Kenya, Tanzania and Rwanda where it has sold 110,000 systems benefiting over 550,000 people.

Following Total SA’s commitment, the Government has consented to a proposed acquisition of the issued and to-be-issued share capital of Maersk Oil Exploration International (Mogas Kenya) in respect of Blocks 10BA, 10BB and 13T. Earlier, Total had acquired Maersk Oil for $7.45 billion in a share and debt transaction.

Africa Finance Corporation and Harith General Partners (Aldwych Holdings) have merged their electricity generation assets into a new company – Anergi Holdings (includes Lake Turkana Wind Farm and Rabai Heavy Fuel plant in Kenya.

The competition Authority approved the proposed acquisition of indirect control of Savannah Cement by Benson Sande Ndeta. 

The Competition Authority approved the proposed acquisition of Associated Vehicle Assemblers by Simba corporation. 

Real Estate & Supermarkets M&A

Actis has agreed to sell its 79.5% majority stake in Mentor Management Limited a Kenyan project management company, to Turner & Townsend, a global construction and management consultant. The management team of MML will retain its minority stake. Actis acquired a controlling stake in MML in 2011 (Via Business Daily).

Mr. Price franchised business carried on by Deacons (East Africa) PLC will be transferred on or after 1st April, 2018 to MIRP Retail Kenya Limited  which will carry on the business.

Nakumatt Holdings and Tusker Mattresses have made an application under section 25 of the Act for the exemption of their proposed management services and loan Agreement for a period of three years.1. The terms of the agreement are that: Tuskys shall provide management services to Nakumatt including procurement and inventory management; Tuskys shall advance a loan to Nakumatt to provide it with emergency funding which shall be used to pay some of the outstanding amounts to employees and landlords; Tuskys shall provide recurring payment guarantees to the suppliers of the target to ensure the suppliers supply stocks to the following Nakumatt’s outlets: Village Market, Galleria, tikay Center, Lavington, Prestige, Mega, Highridge, Karen Crossoads, Ridgeways, Lifestyle, Embakasi, Garden City.

After 40 years, Makini Schools are being old to Schole Ltd, who will acquire all shares of Makini, and who will work with ADvTECH to enhance the quality of education as Makini continues with the Kenyan curriculum.

Telecommunications, Media & Publishing M&A

Kwesé has acquired a significant stake in iflix Africa, which will now form part of Kwesé’s diverse broadcast offering, as the core vehicle to deliver seamless mobile experiences to millions of viewers in Africa. Having set up operations in Nigeria, Kenya, Ghana and South Africa, iflix offers users the region’s most extensive collection of highly acclaimed local African and international series and movies, including first-to-market exclusive programming. This, in partnership with Kwesé’s broadcast operations and footprint, will create an exceptional mobile offering for consumers on the continent.

TPG Growth, the middle market and growth equity investment platform of global alternative asset firm TPG, announced today that it has signed a definitive agreement to acquire a majority stake in TRACE, the market leader in afro-urban music and entertainment. The remaining stake will be owned by TRACE’s co-founder and management team. TPG Growth will invest alongside Evolution Media and Satya Capital. As part of the transaction, MTG, a leading international digital entertainment group that invested in TRACE in 2014, will sell its stake in the company.

International Paper and Board Supplies carrying on the business of trading in printing and packaging materials and consumables at L.R. No. 209/11066, will transfer all its business, stocks and assets to The Print Store who intends to carry on the business from the aforesaid premises.

The Competition Authority authorizes the proposed acquisition of the entire issued share capital of Alldean Networks limited, Simbanet com limited and Wananchi telecom limited by Synergy.

Pressmaster carrying on the business of trading in printing and packaging materials and consumables at L.R. No. 209/12156, will transfer all its business, stocks and assets to Pressmaster Africa Ltd.

The Competition Authority authorized the proposed acquisition of the assets and business of International Paper and Board Supplies Limited by the Print Stores Limited, on condition that the acquirer absorbs not less than 45 out of the current 78 employees in the target business.

The Competition Authority authorizes the proposed acquisition of the entire issued share capital of Pressmaster Africa Limited by Ramco Plexus.

Edit From Tanzania where businessman Ali Mufuruki is seeking to increase his stake in Wananchi Group,  incorporated in Tanzania from 1% to 51% by acquiring 50% of the company, according to this notice (PDF) to Tanzania’s Fair Competition Commission.

Edit American Tower Corporation (ATC) has reached an agreement to acquire 723 telecommunication towers held by Telkom Kenya for an undisclosed amount. The deal, which is expected to be completed in the first half of 2018, will give the multinational a presence in the country, nearly a decade after making its maiden foray into East Africa through similar acquisitions in neighbouring Uganda and Tanzania. Read more

Other M&A

The Competition Authority authorized the proposed acquisition of 40% of the ordinary shares in AAH (BVI) limited by Oman Trading International with certain veto rights.

Nairobi Supermarket Shoppers and Economics Trends

Chris (@blackorwa) has a blog on Kenya supermarket buyers, deciphering consumer patterns and habits of Nairobi shoppers by analyzing and decoding their discarded supermarket receipts.  This is an interesting experiment, in which they actually paid street kids to dig and dive for recipes in the garbage. They based their search for trends on a previous study at Walmart to draw out patterns of shoppers.

some interesting findings

  • Supermarkets not within malls have 61%  of their customers buying less than 3 items and spending Kshs 200 (~$2) on average.
  • M-PESA is yet to dominate retail – it was used for just  3.6% of supermarket transactions, with cards (credit/debit) used for 1.8% of transactions 0  as cash is still king at supermarkets. Safari com hopes to change that with 1tap which makes it faster to make purchases.
  • On a typical weekday, a small well-positioned supermarket does 2,350 transactions with a value of about Kshs 360,000. This translates to about Kshs 10.8 million in revenue a month.
  • Margins are thin, and supermarket profit are determined by controlling labour expenses.
  • Cooked food, mineral water, and bakery drive a lot of sales – they have the highest sales volume and greatest profit margins.

Take  a look at it the study

Nakumatt Voluntary Administration

Troubled supermarket chain Nakumatt applied for voluntary administration to enable the chain to continue operations while freezing a mounting series of claims from banks, mall landlords, suppliers and other creditors as they seek options on how best to survive.

Nakumatt in administration

The move effectively ends the management of Atul Shah and surrenders  decision-making at Nakumatt to Peter Kahi of PKF Consulting. One of the first orders of business of the company in administration will be for Kahi to draw and publish a statement of Nakumatt’s assets and debts while separating bank ones, preferential creditors, unsecured creditors, and connected creditors. Up to now, the true and total debt has been a matter of speculation that could be up to Kshs 30-40 billion.

The Nakumatt statement reads that “the senior lenders are aware of Nakumatt’s financial position and are supportive of Nakumatt’s application for an administration order.  Further, Tusker Mattresses Limited has, subject to the Competition Authority of Kenya’s approval, undertaken to forge ahead with its investment in Nakumatt in connection with its proposed merger with Nakumatt.”

Past funding proposals prior to the Tuskys deal under consideration have not materialized. The insolvency law, which Nakumatt cites in its application for administration is among a series of new corporate laws passed in 2015 and is now focused on bringing troubled companies back to life. Aspects of the laws have been used at distressed companies including Uchumi and Kenya Airways.  Going into administration lowers the voting powers of banks, who are secured, and it gives Nakumatt power to deal with the unsecured debts.  The banks themselves were legally prevented from appointing an administrator as there have already been cases filed by some creditors asking for the liquidation of Nakumatt.

State of Kenya’s NSSF

Kenya’s National Social Security Fund (NSSF) published their financial accounts in the newspapers last week after they were earlier gazetted.

The Kshs 174 billion statutory fund, had income in the year to June 2016 of  Kshs 10.7 billion which was down from 19.3 billion the year before. The was after the fund received 12.8 billion of contributions from members (up from 11.7 billion) and paid out 3.1 billion. They had investment income of Kshs 12.8 billion, and paid administrative expenses of Kshs 5.5 billion leaving a surplus for the year of  Kshs 5.2 billion, and which was down from 13.2 billion in 2015.

In terms of assets, they have quoted shares of Kshs 49 billion (down from 57 billion in 2015), treasury/infrastructure bonds of 52 billion, 8.9 billion of corporate bonds, undeveloped land of 9 billion and buildings/ land of Kshs 19.9 billion.

Top shares in the NSSF Kshs 49 billion quoted investments portfolio include 25 million EABL shares (worth 6.9 billion shillings), 320 million Safaricom shares worth 5.6B, 116 million Britam worth 5.6B, 185 million KCB shares worth 6.2 billion, 88 million Equity Bank worth 3.4 billion, 3.2 million BAT worth 2.6 billion and 56 million Bamburi Cement shares worth 9.6 billion. NSSF also owns 24 million EAPCC shares worth Kshs 868 million and 148 million National Bank (NBK) shares worth 1.4 billion.

In the 1990’s the fund was sold illiquid plots at inflated prices and in the 2000’s, it deposited some funds in shaky banks that collapsed soon after. They still have a few issues with land, and the undeveloped land assets of the NSSF include 3.2 billion worth of plots at Mavoko and a Kshs 3.5 billion plot on Kenyatta Avenue in Nairobi.

The NSSF accounts were audited, by the Office of the Auditor General of Kenya (OAG) who qualified the accounts of the fund owing to some issue including

  • Unremitted contributions; A sample of 20 employers found that they had not remitted Kshs 755 million of deductions to the NSSF.
  • Another 764 million of contributions were held in suspense accounts.
  • Hazina Plaza/Polana Hotel Mombasa had rent owed to the NSSF of 239 million.
  • Milimani Plots at Kisumu where a Kshs 178 million estate that brings no income.

Other issues flagged included:

  • The stalled Hazina Trade Centre in Nairobi, which remains 38% complete with construction having been halted after Nakumatt Supermarkets who have a branch in the building had refused to give the contractor (China Jiangxi) access to the basement where they were to provide reinforcement to pillars of the building. The OAG recommended that the NSSF take legal action against Nakumatt in order to complete the Kshs 6.7 billion construction.
  • NSSF new rates

    NSSF budgeted income for the year was  Kshs 44 billion, but only 10.8 billion was raised; This was partly due to poor performance of the portfolio of shares listed at the NSE, but also due to non-implementation of changes to the NSSF act which would have seen increased contributions from members into the scheme.

  • Illegal transfer of a plot of land from the NSSF to Kenya’s Judiciary, and works at Nyayo estate at Embakasi.

$1 = ~Kshs 100

Nairobi Supermarkets & Mall Moments

It has been an interesting few days in the Nairobi mall and supermarkets space.

It started off with a notice on social media from the Junction, a 26,000 square meter mall stating that Nakumatt had surrendered their space at the mall. Nakumatt was the anchor tenant of the mall which opened in 2004 and now has  115 stores.

But Nakumatt which has been having cash flow and supplier payment issues, and which have all resulted in  most common everyday products like fresh foods and supplies missing from their store shelves, then put out a statement alluding to ongoing talks with the Junction mall and their suppliers with advanced plans to restock their shelves.

Later on the same day Nakumatt got a court injunction temporarily stopping their removal from the Junction and issued another more formal statement about how the Junction management had tricked them and illegally took over their space after they had paid Kshs 20 million, hurting their image in the mind of employees, suppliers, and customers.

Knight Frank who manage the Junction also issued a statement acknowledging the court order, which they would follow, but stating that Nakumatt had signed a surrender on 15th September and then failed in its payment obligations and had not documented a commitment to restock the shelves by the surrender date.

Tuesday also saw an announcement by Majid Al Futtaim that they would be opening their third Carrefour store in Kenya at TRM (Thika Road Mall),  a 28,000 square meter mall on Thika Highway. The space had been surrendered by Nakumatt just two weeks before that. Carrefour operates stores at the Hub in Karen and Two River malls.

The release also contained some interesting stats on suppliers and employment:

– We are looking to stock over 30,000 items at the hypermarket, including fresh produce, groceries, a fresh bakery, and a butchery
– (We) work with over 640 suppliers, local manufacturers, producers, and farmers, which contribute to the overall economic growth in Kenya both directly and indirectly. Only one of the suppliers is foreign.
– The opening of the new branch at TRM will boost the staff employment count at Carrefour in Kenya to 800, with 600 already working at the other two branches located at The Hub in Karen and the Two Rivers Mall.

There has been quite a bit of clamour by customers of Carrefour, which was becoming quite crowded at Karen on month end, to expand.

An equity deal to rescue Nakumatt deal seems to have floundered, and a new announcement about ongoing discussions for a management partnership arrangement  between Nakumatt and a rival supermarket chain Tuskys have not inspired the confidence of supplier and financiers of Nakumatt.

Other believed beneficiaries of Nakumatt surrendering any more stores are expected to be Naivas and Khetia. This week also saw Naivas launched Naivas Pay in partnership with Interswitch. The launch was a Ciata Mall, at their store in a space Naivas took over after it had been previously booked by the management of Uchumi.

Uchumi itself is in the process of concluding a deal to raise Kshs 3.5 billion from a  private equity investor.

Another interesting concept in the supermarket space, is Seven 2 Seven, a franchise of mini market stores that only stock fast-moving consumer goods (FMCG) and serve as agents of some banks. They are on track to have 100 stores in Machakos, Kajiado, Nairobi, Kiambu, Muranga, Nyeri, Embu, Kirinyaga, Meru and Nakuru counties by year-end.

EDIT November 30 Majid Al Futtaim announced plans to open its fourth Carrefour hypermarket in Kenya, after taking up the anchor tenancy at the Junction Mall on Ngong Road. The new hypermarket will be opened in January 2018.