Tuskys discussing a sale of a large stake in the business to raise funds to support expansion. Tuskys rival Naivas recently netted Ksh1.5 billion in a stake sale, signalling investor appetite for retail businesses.
The family of Joram Kamau, which owns the Tuskys supermarket chain, is in talks to sell a majority stake in the business to a group of investors including a private equity fund and a rival foreign-owned retailer. Notably, foreign-owned supermarket chains that may be interested in scooping up the Tuskys stake offloaded by the family include Carrefour, Shoprite, Game Stores and Choppies.
Tuskys rival Naivas recently raised about Ksh1.5 billion after selling a stake in the business to a group of investors led by World Bank’s International Finance Corporation. Naivas is a similarly family-owned business as Tuskys.
Selling a majority stake in Tuskys would allow the Joram Kamau family to both raise additional funds to grow the business and bring on board an anchor investor, which is important for Tuskys’ IPO plan.
Moreover, Tuskys is expected to use part of the proceeds from a stake sale to settle outstanding supplier dues. The coronavirus disease outbreak has put Tuskys in a financial crisis, with the supermarket chain struggling to pay its suppliers and maintain its large workforce.
Delayed release of supplier payments has driven some brands to halt supplies to Tuskys outlets, resulting in empty shelves that risk turning away shoppers.
As for the workforce, Tuskys seeks to cut some jobs after closing several outlets across the country. But it has run into trouble with labour unions over its headcount reduction plans. Tuskys’ wage bill runs to Ksh200 million a month, which has become a burden amid a drop in sales and spike in costs in the face of the coronavirus fallout.
Tuskys hopes to wrap up the talks with potential investors by the end of this month. The Competition Authority of Kenya has promised to speed up the approval of an investment deal in Tuskys.
Notably, Tuskys is currently under several restrictions from the regulator after suppliers complained about default in payments of their dues. For example, the regulator has prevented Tuskys from paying bonuses to its executives or opening new outlets without its approval. However, it has allowed Tuskys four months to clear outstanding supplier payments.
Tuskys pegged its IPO on bringing on board an anchor investor to inject more cash in the business and guide operations strategy. But it is currently not clear whether the investment deal the Joram Kamau family is discussing also includes IPO plans.