For almost two decades, Kenya’s retail store Tuskys has dominated the market establishing itself as an alternative space for shoppers who looked for quality at an affordable rate. However, two years ago, the retail store has seen a downward trend with increased competition from online based stores as well as the rise of foreign stores like Carrefour and the Game.
The company has been unable to meet its financial obligations including paying suppliers and other debtors. This situation has been severe making the Competition Authority of Kenya to come in and scrutinize the accounts of the retailer.
The Authority issued Prudential and Reporting Orders to Tusker Mattresses Limited (Tuskys), requiring it to submit records revealing the full extent of debt owed, financial statements and records, sales forecasts, among others.
Now, the retailer shareholders through Orakam, the retailer parent company have released a statement describing their path to recovery. This includes forfeiting the majority stake of the company to yet to be identified equity investor who will spearhead growth and development.
“The Orakam Shareholders provided their nod to the acquisition of a majority stake in TUSKYS by any equity investor who will further provide strategic leadership for the long-
term growth of the business and for the benefit of all stakeholders,” reads a statement by Bernard Kahianyu, the board chairman. “The TML Board of Directors together with a team of transaction advisors are currently evaluating the various offers with the aim of concluding the recapitalization of the business in the shortest time possible.”
There has been complains of the retailer failing to honour its debts as some suppliers and landlords threatening to take legal action against the supermarket. However, the board says it is in discussion with them to avert a situation that befell Nakumatt Holdings, a similar supermarket that was liquidated last year.
As the strategic investment option proceeds, the Management team has also been engaging business stakeholders including retail merchandise suppliers, landlords, staff, among other priority partners.
“Through this engagement effort, TML has secured a suppliers’ commitment to avail supplies for
sale pending the conclusion of the capitalization effort,” the statement continues.
Kahianyu says under this arrangement, suppliers have signed in on a short-term portal that will ring-fence their supplies and ensure timely payment for the same. This option provides a much-needed lifeline for the business and secures a win-win stability option.
Other key industry players include Carrefour Kenya (a franchise owned by Majid al Futtaim Group of the UAE), Uchumi, Massmart (trading in Kenya as Game), Choppies (which acquired Ukwala Supermarkets), Naivas, Quickmart and many local brands such as Mulley’s, Eastmart, and Cleanshelf.
There has been a rise of investment by equity firms in Kenya’s retail industry including entities like QuickMart, Naivas and Tumaini. Last year, Naivas, the biggest of the local supermarkets announced that French PE Amethis alongside its partners DEG, MCB Equity Fund and IFC, a member of the World Bank Group, has acquired a minority stake in the Naivas group.
Adenia Partners, a private equity firm investing in Sub-Saharan Africa, and headquartered in Mauritius announced that it completed a majority investment in Quick Mart Limited, a transaction structured through Adenia Capital (IV), a EURO230mn fund.
A year earlier, the same PE entity announced it had completed an investment in Tumaini Self Service Limited through a special purpose vehicle, Sokoni Retail Kenya Limited. The transaction provided growth capital to Tumaini and was also structured through Adenia Capital (IV), a €230 million fund.
Read also: Industry analysis: Kenya’s retail sector