More Uchumi fallout

According to the East African, the closure of Uchumi was triggered by a standoff among the board of directors about the company’s plan to raise another 500 million shillings ($7 million) on top of the 1.2 billion raised last year in the rights issue.

The East African also highlights the dumping of shares on the day before Uchumi closed. In the last few months, certain investors offered blocks of shares at the NSE – 11.9 million (December 27), 6.2 m (December 29) and 5.2 m shares in mid-April.

Kirubi re-appears
The former Chairman and largest shareholder for many years (till 2004), Chris Kirubi, appeared on KISS FM’s political show Crossifre on Sunday evening. Despite the twin controversial events of Saturday – the launch of Narc-Kenya and the anointing of William Ruto as a Kalenjiin elder, the entire hour was spent discussing the closure of Uchumi with Kirubi on the spot as he defended his tenure and role at the company.

Some revelations:

  • Kirubi stated that the 2005 rights issue was criminal – and that the public should never have been allowed to inject 1.2 billion shillings into Uchumi given its precarious situation.
  • The management misled the board with projections and information about the company’s expansion and performance. The board also fired MD Thairu for these reasons.
  • Kirubi felt that the company did not have the expertise to manage modern supermarkets which was why he made arrangements to have a South African partnership.
  • Senior managers robbed the company for many years.
  • Kirubi defended his supplier role at the company, saying he did business for many years before he became chairman and he saw no reason for this to stop.
  • The Minister of Trade is playing politics, by threatening to investigate Uchumi – since the Ministry PS has always been a member of the board of Uchumi and was privy to all board matters.
  • He said having the government as a shareholder in Uchumi was detrimental and limited the company from being competitive. Government has no business being in business.
  • He also read out portions of his 2004 resignation letter as Chairman, which he said was copied to all directors, regulatory bodies and the Government warning of an impending collapse of Uchumi.

9 thoughts on “More Uchumi fallout

  1. Anonymous

    i think chris is trying to defend himself but if you look at he’s past dealings they are part of a pattern.
    if you look at the collpase of kenatco – kentaco used to have contracts to ferry oil for all the oil majors you would think! but in actuality chris as the MD of kenatco (conflict of interest)had all the check paid to him directly. so @ kenatco he was manager,and sub contractor – talk a about conflict of interest.

  2. mashatall

    Pole banks for the Uchumi fallout.Kirubi can be blamed for the whole fiasco, but small investors without any financial investment analysis knowledge, are the ones left suffering coz the CMA has no regulatory teeth. It is telling that so far the CMA has not commented on the fallout, when wananchi are still lining up just to pick up their Kengen refund checks from brokers.Dumping of shares was of course done with the full knowledge of the brokers, so who is there to protect us small fish? investors advice from the sage of omaha- warren buffett
    “the secret of becoming rich is to be greedy when others are fearful and very fearful when others are greedy.”
    Uchumi had no financial float and was bound to go down, unless someone bought them out. CK did what he perfected at kenatco, sucking Uchumi dry to finance his capital FM acquisition. Thats why i cannot touch eveready batteries no matter what price thay sell it at. hope the IPO flunks bigtime as payback to both CK and merali !!!

  3. Anonymous

    It would be interesting to know the names of any big shots who bailed out before. What is the law in Kenya for insider trading? I just hope will not be sued for your financial advice

  4. slim

    Totally agree with you guys but Thairu and his team cannot escape blame financing long term asset acquistion with short term capital boss!!. anyway CMA needs to be taken to task for letting the drama get to where it is.

  5. bankelele

    Anonymous: He has no choice since Uchumi collapse can seriously damage his reputation/image he has built

    mashatall: The rights prospectus warned us about the company’s bad outlook( , but how many other investors read it? People think anything new on the NSE to buy is good

    VItuVingiSana: Nice report on the CMA/NSE caboose

    slim: More neds to be said about the change at Uchumi from a FMGC to one sotcked with slow moving epxpensive imported junk, that was paid for upfront, and at the expense of other regular local Uchumi suppliers

  6. sassy

    i guess everyone has attached their emotions to the reasons as to why Uchumi failed and Chris this and that. The fact is we as investors or small fish as mashatall calls us we have a lesson which is we need to go back to the abc of investing. we should have done our research and investigation about the organization. figures mattered but i guess investors overlooked them and went along with the hype of the dealers to buy uchumi shares. Its all about taking risks we either win or lose and we lost. lesson learnt- move on.
    as for insider trading i dont believe that we all did not notice when the big fishes were selling we did but chose to stay on our choice and loss again. Kirubi may have his conscience clear but his reputation has been marred thats a punishment enough.

  7. pesa tu

    Serves the retail investors right. Most of them are so ignorant, they didn’t even read the KENGEN prospectus before investing.

    Everything was out in the open, a casual read of the UCHUMI prospectus or a trip to their shops 2 weeks ago could have shown you all wasn’t well.

    By the way there’s something called STATE CORPORATIONS ACT in the KENGEN prospectus. It means whoeverwins the 2007 elections can change the entire senior management in Kengen and there’s nothing we(shareholders) can do.
    Plus, they can cancel any tenders/contracts.

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