Mystery investor hands Uchumi Sh3.5 billion lifeline

Shoppers at an Uchumi outlet in Nairobi. The retailer owes suppliers Sh3.6 billion. [Wilberforce Okwiri, Standard]

 

oho2af9f1pan9xqn596504e6bd3a4 Mystery investor hands Uchumi Sh3.5 billion lifeline
Shoppers at an Uchumi outlet in Nairobi. The retailer owes suppliers Sh3.6 billion. [Wilberforce Okwiri, Standard]

Struggling retail chain Uchumi Supermarkets is close to inking a deal that will boost its cash flow by Sh3.5 billion after protracted talks with a strategic investor.

Sources close to the retailer said yesterday behind-the-scenes meetings with the yet-to-be-named investor had borne fruit, with only the biggest shareholders – the Government and Jamii Bora Bank – now standing in the way of conclusion of the deal.

“The investor is willing to give Sh3.5 billion, but he would like to get some commitment from the Government,” said the source who sought anonymity because he is not authorised to comment on such matters.

Uchumi Chief Executive Julius Kipng’etich was also quoted by an online news outlet, saying the deal was awaiting regulatory approval before it is officially announced.

“We shall announce in a few days once all the necessary approvals are finished,” Dr Kipng’etich was quoted as saying.

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The Government has a 14.7 per cent stake in the retailer while Jamii Bora Bank holds a 14.9 per cent stake.

Uchumi had hoped a strategic investor would pump in excess of Sh5 billion in exchange for a controlling stake. The retailer’s management said last year it had narrowed down to three investors from a pool of 36 who had expressed interest.

Should the deal hold, it would throw the cash-strapped retail chain a much-needed lifeline after years of decline, with the Government already having given it a Sh700 million shareholder loan and is in negotiations to pump in more money.

Treasury was in the process of disbursing an additional Sh1.3 billion to the troubled retailer, but the process was suspended pending an audit of its expenditure.

Uchumi planned to use Sh600 million of the loan to pay creditors in Uganda and Tanzania where it closed shop in October 2015.

The listed retailer, whose shares traded at Sh2.2 each, has a market capitalisation of Sh831 million, which means that the investor will be looking for a significant stake.

Principal Secretary for the State Department of Trade Dr Chris Kiptoo also confirmed that a deal was in the offing, but refused to divulge further details.

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“With Uchumi, we have someone on board,” he said on the sidelines of the Kenya Trade Week in Nairobi.

Jamii Bora Chief Executive Sam Kimani did not respond to our text messages or calls.

The structure of the investment would also depend on its creditors who had entered into talks with the retailer to change their debt into equity.

Uchumi owes suppliers Sh3.6 billion, with another Sh2.5 billion debt held by banks through charged assets, although talks of the conversion have since died down after Uchumi avoided a winding up suit last year.

The cash injection will, however, boost the retailer which has continued to suffer stock-outs and struggled to pay its workers, prompting a strike over May and June salaries.

It will also return the retailer to its turnaround plan, which had been derailed by lack of funds even after the retail chain sold off its Ngong Hyper outlet for Sh1.4 billion and the Lang’ata one, which is charged to United Bank of Africa (UBA) under a Sh250 million short-term facility to pay suppliers.

The retailer had also said it had received “interesting offers” for its Kasarani property despite it being the subject of a law suit. 

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