In letter dated March 28th Tuskys informed the Competition Authority of Kenya (CAK) that it had reservations about its investment in Nakumatt supermarket.
“Our client has raised concerns regarding certain proposals by the administrator of Nakumatt Holdings Limited on the restructuring of the company, as a result we are instructed to advise you that our client is reconsidering its proposed investment in Nakumatt Holdings Limited which was to be preceded by the Management Services and Loan Agreement now under consideration for exemption by the Authority, reads Tuskys’ letter to the Competition Authority of Kenya (CAK).
Slightly more than a week later, the CAK has written to Tuskys’ shareholder Yusuf Mugweru informing him that one of the partners in the merger proposal had already written to the authority requesting suspension of the merger deal, “We would like to inform you that one of the parties to the exemption application has since instructed the authority to suspend analysis of the said application, said CAK’s letter to Mugweru through his lawyers Murgor & Murgor Advocates.
Nakumatt Supermarket was once one of the country’s largest retailers with branches across East Africa, however, management troubles has left it with a sh.35 billion debt forcing it to cross several of its branches.
In October 2017, Nakumatt supermarket had proposed the appointment of Mr. Peter Kanyi as its administrator to spearhead its restructuring, a request that the courts granted under the Insolvency Act of Kenya, which grants the boards of struggling companies the option of appointing an administrator. Putting a company under administration is a better indication of a company’s intent to return to profitability rather than declaring for bankruptcy.
However, the Nakumatt administrator, has not had the best of times so far, his proposal to downsize the company’s workforce faced vehement opposition from the Kenya Union of Commercial Food and Allied Workers on claims that it broke labour laws and went against a previously negotiated Collective Bargaining Agreement with the workers.
Furthermore, a recovery proposal plan he tabled to the company’s creditors failed to take off after they failed to vote in a meeting held in March 2018. A section of the creditors rejected Mr. Kanyi’s proposal which forced the adjournment of the meeting to a further date.
Nakumatt had received reprieve after agreeing on a merger deal with Tuskys supermarket which would see Tuskys provide operational management services and guarantee part of Nakumatt’s debt to enable it access supplies. The proposed merger agreement had been tabled to the competition authority for consideration but has now been suspended after the recent applications against the merger.
The suspension of the merger agreement puts in jeopardy recovery efforts that Nakumatt and its stakeholders have been working out for some it, if not resolved soon the retailer may have slim chances of getting back to its glorious days.