Nakumatt, Tuskys yet to enter formal merger agreement

Retailers Nakumatt and Tuskys are yet to reach a formal agreement aimed at merging the two businesses as part of a recovery plan to revive Nakumatt.

The two retailers have confirmed that talks are ongoing but stressed that the deal was more complex and required the buy in of key stakeholders such as suppliers, financiers as well as the nod from the Competition Authority of Kenya.

Initial reports had indicated that Tuskys would give Nakumatt access to its stock inventory but that has also not yet been firmed up as senior managers from both retailers as well as transaction advisors tailor an engagement framework.

“These confidential discussions are continuing and although the engagement has been positive and good progress has been made, it is important that we acknowledge that a formal agreement is yet to be reached and will be subject to notification and approval by regulators and lenders,” reads a joint statement from Nakumatt and Tuskys.

Among key issues the two are yet to streamline in the takeover bid is the incorporation of employees as well as future engagement with suppliers.

The deal is also said to be incorporating Nakumatt’s outstanding dues with landlords with Tuskys said to be willing to take up running part of its branch network.

“Any transaction of this nature and magnitude is complex, involves consideration of a broad range of issues and interests of key stakeholders including employees, suppliers, landlords and lenders whose interests are paramount and are being carefully considered,” reads the statement.

A thorny issue in the transaction however is the accumulation of debt by Nakumatt estimated at Sh15 billion in 2015.

Rich Management chief executive officer Aly Khan Satchu said this would be the major hurdle both retailers would have to cross in order to convince financiers.

“Nakumatt debt as we know it is $150 million. Now, which company can afford to take over that debt in a merger? As it stands the numbers don’t make any sense,” Mr Satchu said in an interview.

The two are yet to file a merger request with the competition watchdog as negotiations ensue.

Nakumatt has over the past year suffered from high indebtedness that has seen it fail to honor its financial obligations with suppliers canceling delivery orders, further straining its operations.

Nakumatt has failed to secure a strategic investor to pump in a reported Sh7.7 billion for 25 percent stake in the retailer.