Director opposes proposed Tuskys-Nakumatt merger (Kenya)


By Staff | Business Daily, Kenya September 28, 2017

Yusuf Mugweru, the fourth born of seven siblings who own Tuskys Supermarkets, has opposed a proposed merger of the retail with struggling Nakumatt in a move that could scuttle the deal that was announced last week.

Mr Mugweru claims that his siblings sidelined him in ongoing negotiations with Nakumatt, and that he is yet to receive any information on the proposed deal.

The Tuskys director, with a 17.5 per cent stake in the retail chain, says he only learnt of the negotiations and proposed merger through the media.

“No information in this regard has been availed to our client as shareholder, or through Yusuf Mugweru its director on the board of Tusker Mattresses Limited and Orakam Limited and Orakam Holdings Limited.”

“Needless to state that a transaction in the nature of a merger with another company cannot be contemplated or consummated, without the express and written approval of all shareholders. Our client has not consented or approved such a transaction,” Mr Mugweru said through his lawyer, Philip Murgor.

Tuskys and Nakumatt last week announced that confidential talks have been ongoing, but a formal agreement is yet to be reached.

Tuskys chief executive Dan Githua and his Nakumatt counterpart, Atul Shah, did not respond to questions on the subject.

Mr Githua had in an interview last week said that the proposed merger would see the two retailers operate under one management with the owner families as principal shareholders.

The seven siblings took over ownership of Tuskys in 2002 after the death of their father and the retail chain’s founder, Joram Kamau.

Seven years later, Tuskys owners incorporated a holding company, Orakam Holdings, through which they own the retail chain.

Mr Mugweru owns his Tuskys shares through a fully owned company, Mugweru Investments Limited.

Other shareholders are John Kago (10 per cent) through Green Pharm Investments, Stephen Mukuha (17.5 per cent) through Mitiki Investments, Sammy Gatei (17.5 per cent) through Future Group Ventures Investments Limited, George Gachwe (17.5 per cent) through Aliann Investments Limited, deceased Mary Njeri (10 per cent) through Kendan Investments Limited and Mary Njoki (10 per cent) through Njowawa Investments Limited.

At the peak of its success, Nakumatt grossed an estimated Sh70 billion in revenues a year while the 27-year-old Tuskys reported sales worth Sh40 billion in 2014.

Tuskys has 54 stores in Kenya, having recently closed one in Nairobi. Nakumatt has a larger regional presence with a total of 62 outlets across East Africa, despite recent closures.

Create superchain

The merger, if successful, will create one of the biggest retail chains in East Africa.

That prospect means it has to go through a rigorous interrogation by competition authorities, who must determine the possible impact of the looming market power concentration on consumers.

Under Kenyan law, the Competition Authority of Kenya (CAK) must approve any undertaking with a minimum combined turnover or assets of Sh1 billion and Sh100 million turnover in the target undertaking.

Mr Mugweru said he plans to take necessary action, including suing his siblings, to stop the proposed merger with Nakumatt.

“In the circumstances, our client formally notifies you as shareholders, that it is opposed to the proposed merger with Nakumatt Holdings Limited and will take all legal steps necessary to injunct the same should it become necessary, without prejudice to its rights to wind up Orakam Holdings and to apply for the appointment of a receiver to deal with, and dispose of its sole asset, Tusker Mattresses,” he adds.

Mr Mugweru has maintained that a 2015 notice he sent to his siblings with the intention of winding up Tuskys remains in force, and that his offer to purchase the shares owned by Mr Kago, Mr Gatei, Mr Gachwe and Mr Mukuha for a combined Sh357.14 million still stands.

His brothers had in March last year offered to buy Mr Mugweru’s shares for Sh100 million.

But in response, Mr Mugweru rejected the proposal and made a counter offer to purchase all their shares.

The wrangle over the proposed merger follows a series of rows among the Tuskys siblings.

Mr Mugweru last year accused his siblings of diverting over Sh1.6 billion from the retailer through various firms they own. Mr Mukuha and Mr Gachwe have since been charged with the alleged theft.

Related stories


AsokoNews Brief

Sign up for our weekly Africa Business Digest, highlighting the Top 5 stories per sector