A Naivas supermarket outlet in Ongata Rongai, Kajiado County, in December 2020.
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Why Appeal Court decision may haunt fresh Sh6 billion Naivas takeover plan
On July 3, 2023, Mauritian conglomerate IBL Group issued an investor note announcing the family of Naivas Supermarket Limited founder, Peter Mukuha Kago, is set to sell an extra 11 percent stake in the company for an estimated $41.7 million (Sh5.92 billion).
It said the transaction would be effected through Mambo Retail, which is the investment vehicle through which a consortium including IBL, French fund Proparco and German fund DEG currently hold a 40 percent stake in Naivas International, which in turn fully owns the operating subsidiary Naivas Limited.
If concluded, the transaction would see the family’s 60 percent controlling stake drop to 49 percent, flipping ownership in favour of the consortium that only last year bought its present combined 40 percent stake in Naivas for $151.97 million (Sh21.59 billion) at current exchange rates.
The Naivas takeover plan by the foreigners has, however, reignited a feud within the Mukuha family with Newton Kagira Mukuha — the eldest of three brothers tussling over ownership of the retail chain — now demanding a nullification of the deal.
Mr Kagira through his lawyers, Ahmednasir Abdullahi Advocates LLP, wants the deal shelved, saying it was directly in breach of a November 25, 2021 order by the Court of Appeal that prohibited dealings in Naivas’ disputed shares, pending hearing and determination of a suit on the retail chain’s shareholding.
A bench of judges Daniel Musinga, Hannah Okwengu, and Asike Makhandia issued the orders stopping the further sale of a stake in the business after it emerged that Naivas supermarket had sold a 30 percent stake to International Finance Corporation (IFC), a private lending arm of the World Bank, private equity firms Amethis and MCB Equity Fund and German sovereign wealth fund DEG for Sh6 billion in exchange for a minority stake.
''In the meantime, the status quo in so far as the shares in dispute are concerned to be maintained, pending hearing and determination of the said appeal,’’ reads part of the ruling by a three-judge bench.
Mr Kagira obtained the orders after he moved to the Court of Appeal in Nakuru in August 2021 under a certificate of urgency after his previous applications to claim ownership of the business were dismissed by the High Court.
His lawyers said the Court of Appeal order remains in force, hence the sale of additional stakes in Naivas is contemptuous.
“You are aware and at all times been aware of the said court order and the particulars of the various suits pending in court,” Ahmednasir Abdullahi Advocates LLP firm said in a July 21, 2023 letter to Kagira’s siblings and Naivas Limited.
“In a move intended to muddle and or pre-empt the issues pending determination by the court, a company known as Naivas International was incorporated in Mauritius and the shares held in Naivas Ltd by Simin Gashwe Mukuha (deceased), David Kimani Mukuha, Grace Wambui Mukuha and Linet Wairimu Mukuha transferred to Naivas International” the letter further said.
Ahmednasir Abdullahi Advocates LLP claimed that Gakiwawa Family Investment was thereafter incorporated with Simon Gashwe Mukuha (deceased), David Kimani Mukuha, Grace Wambui Mukuha, and Linet Wairimu Mukuha as its shareholders who then used the company to acquire shares in Naivas International.
“In blatant defiance and violation of subsisting Order of the Court and well-established tenets of law relating to the matter pending before the court, Gakiwawa Family Investment proceeded to offload some of its shares in Naivas International to Amethis and other parties whose particulars are well known to you. Thereafter Amethis and other parties disposed of their shares in Naivas International to IBL Group through Mambo Retail. In addition, Gakiwawa Family Investment offloaded some of its shares in Naivas International directly to Mambo Retail,” the law firm said.
“In what appears to be a further attempt to muddle up and or pre-empt the issues pending determination before Court, it has come to our client’s attention that IBL Group (through Mambo Retail) intends and or is in the process of acquiring additional shares in Naivas International from Gakiwawa Family Investment. This effectively further alters and/or interferes with the ownership/shareholding in Naivas. To say the least, these acts amount to further violation of express orders of the Court, and are a furtherance of acts of contempt,” it added.
Mr Kagiri’s lawyers now threaten to file contempt proceeding against those involved in the sale of the additional 11 percent stake in Naivas.
“Our firm and irrevocable instructions are to demand as we hereby do, that you immediately cease and desist from interfering with the ownership/shareholding of Naivas Ltd whether directly or indirectly. We further demand that the acquisition of shares in Nsaivas Ltd/ Naivas International Ltd by IBL Group/Mambo Retail, and or any other entity be halted immediately, and any shares transferred and/or sold be reinstated forthwith” Ahmednasir Abdullahi Advocates LLP said.
The family’s investment vehicle – Gakiwawa Family Investments — has been offloading its shares in recent years in multi-billion shilling deals.
The Mukuhas used to own 100 percent of Naivas until 2020 when they sold a 31.5 percent stake for Sh6 billion to a consortium comprising the International Finance Corporation (IFC), DEG, and private equity firms Amethis and MCB Equity Fund.
The money was spent on propping the retailer’s growth across the country, with the ownership of the Mukuhas falling to 68.5 percent but becoming more valuable as the supermarket operator witnessed a profitable expansion.
In June last year, the IBL-led group reached a deal to buy the 31.5 percent stake held by IFC and its co-investors for $119.68 million (Sh16.99 billion).
The group also acquired an additional 8.5 percent stake from the Mukuhas for $32.29 million (Sh4.58 billion), marking the first time the family cashed out of its investment through the sale of shares.
The family stands to receive at least Sh5.8 billion from the new deal, based on last year’s transaction which valued the retailer at $379.9 million (Sh53.95 billion at current exchange rates).
IBL currently holds an effective stake of 26.32 percent in Naivas through its majority ownership of 65.8 percent in Mambo Retail.
It is followed by Proparco and DEG whose indirect interest in the retailer stands at 8.29 percent and 5.39 percent respectively.
DEG reinvested in Naivas alongside IBL immediately after being bought out along with the earlier investors – IFC and the PE funds.
Mr Kagiri has since 2012 been feuding with his younger brothers for control of the multi-billion-shilling business. He is seeking the ouster of his brother, David Kimani, as CEO of Naivas, a seat on the board of the retailer, a 20 percent stake, and additional shares from the 20 percent stake held by his father, the late Peter Mukuha Kago.
Mr Kagira accuses his brother David Kimani of teaming up with his late brother Simon Gashwe and fraudulently sanctioning the registrar of companies during Naivas registration and locking him out as one the registered owners of Naivas.
