A consortium comprising World Bank’s International Finance Corporation (IFC) and French private fund Amethis have sold an estimated 30 percent stake in Naivas Supermarket to a cluster of investors led by Mauritian conglomerate IBL Group.
The value of the transaction was not disclosed but IFC and its partners MCB Equity Fund, Amethis, and German sovereign wealth fund DEG had paid Sh6 billion to acquire the minority stake in April 2020.
The investors are selling their shares for a substantially larger sum, with IBL saying this is the highest-value transaction it has ever undertaken.
This underlines the worth of Naivas, which remains a star attraction to private equity funds in Kenya’s retail sector where the collapse of one of the major players in recent years has left a gap.
“The investment in Naivas International [the owner of the retail chain] is the biggest investment in IBL’s history,” the multinational said in a statement.
IBL has also assembled a group of institutional investors to buy out the IFC consortium.
Its partners are sovereign wealth funds Proparco (French) and DEG (German) –for whom the transaction marks a simultaneous exit and re-entry into Naivas.
The deal will not involve fresh capital injection into Naivas after the Sh6 billion shot fuelled expansion of the top retailer in the highly competitive local supermarket business that has attracted major players including the Majid Al Futtaim-backed Carrefour franchise.
The family of the late businessman Peter Mukuha Kago, who founded the business, will remain with a controlling stake in the supermarket.
The exit by the IFC consortium represents an unusually short investment period for institutional investors that typically hold companies for seven years or more.
IBL says the proposed transaction will give it a platform for further investments in East Africa, noting that Naivas has scaled up its operations substantially to entrench its position as the biggest supermarket operator in the country.
“This family business created in 1990 is an example of a success story that has continued to grow despite the pandemic thanks to its strong business model,” Arnaud Lagesse, IBL’s chief executive, said in a statement.
“With 84 outlets in 20 cities and towns across Kenya, it has put modern grocery retail within everyone’s reach. Naivas also contributes to the Kenyan economy, notably by employing over 8,000 people.”
Mr Lagesse added that IBL has expertise in the retail sector, running the Winners supermarket chain in Mauritius.
Naivas has grown to become one of Kenya’s largest companies by sales and employment.
The retailer is set to close the financial year ending this month with a gross turnover of $860 million (Sh101 billion) with an ambition of raising it to $1 billion (Sh117 billion) in the next financial year.
When the IFC group bought into the retailer, it had 60 stores. The company used cash that was raised from the share sale to open more branches including taking over premises vacated by collapsed or struggling rivals Nakumatt Holdings and Tusker Mattresses Limited (the owner of Tuskys brand).
Naivas’ closest rival in terms of branch network is Quick Mart which had 51 stores as of April.
Quick Mart has also been expanding aggressively after receiving an investment from Africa-focused Adenia Partners.
Carrefour Kenya, which benefits from relatively higher spending per shopper in wealthy suburbs, has an estimated 16 branches from which it posted substantial revenue of Sh33 billion last year.
The entry of the IFC consortium valued Naivas at Sh20 billion and the latest transaction is expected to reveal a much larger valuation of the retailer.
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“This is an exciting partnership by our shareholders that will drive us to the next phase of growth. We appreciate the immense knowledge and capacity in the retail industry that IBL brings to the table,” David Kimani, the managing director of Naivas, said in a statement.
For IBL, the acquisition of a minority stake in Naivas marks the expansion of its conglomerate business model that spans 18 countries.