Nakumatt seeks bank loans to finance Shoprite buyout
Posted Wednesday, January 15 2014 at 02:00
The Kenyan chain store wants to buy three Tanzanian based branches.
Nakumatt Holdings will finance the acquisition of three Shoprite outlets in Tanzania through bank loans, the managing director (MD) of Kenya’s largest supermarket chain has said.
Mr Atul Shah said in an interview that Nakumatt is in talks with its lenders for cash to finance the transaction that is estimated at KSh4b (about Shs116b).
“We are (also) discussing with the bankers as we work towards concluding the deal,” said Mr Shah, who last week estimated that the transaction will take about four months to conclude.
The Nakumatt MD was, however, non-committal on whether the entire deal will be financed through bank loans.
Nakumatt is also said to be close to signing a deal with a strategic investor that will see the supermarket get fresh capital injection to ease the heavy debt burden in its books.
The impending deal is disclosed in a new report by Global Credit Rating (GCR), a South African firm authorised by the capital markets regulator to assess the creditworthiness of Kenyan companies seeking debt or investment partners. GCR says that Nakumatt’s profitability is being eroded by interest payments on loans that the retailer has borrowed for working capital.
“Management is in advanced negotiations with a third-party investor to inject new capital into the business, which would markedly improve the group’s credit risk profile and provide funding for medium term growth,” said GCR in the report dated December 23.
The heavy working capital requirement is attributed to the need to stock new branches for the fast-expanding retailer. GCR notes that Nakumatt’s working capital absorptions totalled Sh3.5b (about S102b) last year, most of which were sourced from short-term lenders.
The Kenyan supermarket chain is in the process of buying out three Tanzanian stores of South African retail giant Shoprite. Two of the outlets are in Dar es Salaam while the other is in Arusha.