Naivas Supermarket spent more than five times the value of assets the retail chain acquired from rival Nakumatt’s remaining six branches in a deal worth Sh422 million.
Documents released to Nakumatt creditors show that Naivas outbid rivals Chandarana, Tuskys and Quickmart for the remaining assets of the former giant retail chain.
Property valuation firm Tysons Limited had valued the assets of the six branches– Nakumatt Mega, Prestige, Lavington, Kisumu, Embakasi and Nakuru— at Sh110.5 million, adding that a quick sale could generate Sh77.5 million.
Chandarana bid Sh246 million for the six stores while Tuskys offered Sh70 million for three branches in a sale shepherded by investment banker Dyer and Blair.
“Naivas Ltd now occupies three premises (Nakuru, Lavington and Prestige) having purchased the furniture, fixtures and fittings and negotiated new terms with the landlords,” said the notice to the creditors.
“Furniture and fittings from the remaining three branches located in Nakumatt Mega, Highridge and Mega City Kisumu were also bought by Naivas on 29 November 2019 for use in their other stores. Naivas will not occupy these premises.”
The notice was sent to the creditors to seek their permission to liquidate Nakumatt with the court-appointed administrator saying it was not worth the money to turnaround the retail chain. Nakumatt Mega and Highridge were the top money makers for the retail chain, offering clues on why Naivas paid a premium for the locations.
“Naivas paid for goodwill and also the location, which cannot be valued. Otherwise there is no value in the assets if we had stripped them off,” Peter Kahi, Nakumatt’s court-appointed administrator, told the Business Daily in an interview Thursday.
Nakumatt went into voluntary supervision in early 2018 after seeking protection from its creditors.
Nakumatt, which grew from a mattress shop in Nakuru to have branches across Kenya and East Africa, was forced to shut dozens of outlets from 2017 as it struggled to repay its suppliers, landlords and other creditors.
By February 2017, it had 60 branches that dropped to six in September 2018.
Its sales dropped Sh1.9 billion in the year to February down from Sh51.9 billion in a similar period in 2017.
The company sought protection using Kenya’s newly enacted company laws, which provide a pathway for distressed firms to avoid complete collapse. Now, Mr Kahi has called creditors, who are owed more than Sh38 billion, including banks, suppliers and landlords, for a meeting on Tuesday to vote on the agenda of dissolving the retail chain, in a poll that will see the Nakumatt brand completely disappear in coming weeks.
“With the sale of assets to Naivas Ltd having been concluded, the administrator distributes and appropriate funds of the company to the various classes of creditors in line with IA 2015, after meeting costs of the administration,” says Mr Kahi of the Sh422 million.
The six branches were expected to help the retail chain as it went back to the drawing board to rewrite the wrongs, pick up the pieces and bounce back having learnt from its mistakes. But, it appears, this dream cannot not work.
“An attempted turnaround of the business would be very costly and the company is likely to be lossmaking for the better part of the turnaround window, implying that such a turnaround would need to be financed by additional debt to sustain operations before achieving breakeven,” says the notice.
“The company also has no assets to collateralise such additional funding. The administrator is of the view that it is likely to be difficult to attract an investor to inject the substantial amount of equity required to restructure NHL’s balance sheet due to the current high degree of financial leverage.”