French sovereign wealth fund Proparco has acquired a $31.5 million (3.7 billion shillings) stake in supermarket chain Naivas as part of a consortium that will take a combined 40% stake in the retailer.
Naivas previously announced that Proparco, Mauritian conglomerate IBL Group and German sovereign wealth fund DEG were taking a minority stake in the company without disclosing details of the proposed transaction, including the stake to be purchased.
They are acquiring stakes held by a group of investors including the World Bank’s International Finance Corporation (IFC), MCB Equity Fund, Amethis and German sovereign wealth fund DEG, which acquired the retail shares for $6 billion. shillings in April 2020.
The deal underscores the value of Naivas, which remains a key attraction for private equity funds in the retail sector in Kenya, where the collapse of one of the major players in recent years has left a vacuum. .
“Proparco is pleased to announce its partnership with IBL Group, the largest conglomerate in Mauritius [and] DEG … to jointly acquire a 40% stake in Naivas International, which owns 100% of the shares of Naivas Limited,” the French fund said in a statement.
Proparco said its capital contribution will be $31.5 million (3.7 billion shillings).
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It is unclear whether the 40% stake will be split evenly among the three institutional investors.
The parties have indicated that the deal is far larger than the 6 billion shillings that IFC, Amethis and DEG paid to acquire the 30% stake in Naivas.
DEG is simultaneously exiting its initial investment in Naivas and rejoining the retailer’s shareholder list as part of the new consortium.
It is unclear whether the IFC consortium had purchased an additional 10% stake in the retailer or whether the founders – the family of late businessman Peter Mukuha Kago – are selling additional shares alongside institutional investors.
If Proparco and its partners invest equal amounts, this means that the 40% stake is acquired at a cost of 11.1 billion shillings, valuing Naivas at 27.8 billion shillings.
The entry of the IFC consortium valued Naivas at 20 billion shillings in 2020 and the retailer’s value has risen amid its aggressive expansion across the country since then.
Unlike the previous transaction in which Naivas received growth capital, the proposed deal will see the IFC consortium cash out its two-year investment.
“We have sufficient capital to fund our future expansion,” Naivas said in response to business daily surveys.
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IBL said earlier that it was the highest value transaction it had ever undertaken.
“The investment in Naivas International [the owner of the retail chain] is the largest investment in IBL’s history,” the multinational company said in a statement.
The exit from the IFC consortium represents an unusually short investment period for institutional investors who typically hold companies for seven years or more.
IBL says the proposed transaction will give it a platform for further investment in East Africa, noting that Naivas has significantly scaled up its operations to cement its position as the country’s largest supermarket operator.
“This family business created in 1990 is an example of a success story that has continued to grow despite the pandemic thanks to its solid economic model,” said Arnaud Lagesse, CEO of IBL, in a press release.
“With 84 outlets in 20 towns and villages across Kenya, it has brought modern grocery shopping within reach. Naivas also contributes to the Kenyan economy, including 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 become one of Kenya’s largest companies in terms of sales and employment.
The retailer is expected to close the financial year ending this month with gross sales of $860 million (101 billion shillings) with ambitions to boost it to $1 billion (117 billion shillings) by during the next fiscal year.
When the IFC Group bought the retailer, it had 60 stores. The company has used cash from share sales to open more branches, including taking over premises vacated by collapsed or struggling rivals Nakumatt Holdings and Tusker Mattresses Limited (the owner of the Tuskys brand).
Naivas’ closest rival in terms of branch network is Quick Mart, which had 51 stores in April. Quick Mart also expanded aggressively after receiving investment from Africa-focused Adenia Partners.
Carrefour Kenya, which enjoys relatively higher spending per shopper in affluent suburbs, has about 16 branches from which it recorded a healthy revenue of 33 billion shillings last year.
“This is an exciting partnership between our shareholders that will lead us to the next phase of growth. We appreciate the immense knowledge and capabilities in the retail industry that IBL brings to the table,” said David Kimani, Managing Director of Naivas, in a statement.
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Proparco said Naivas will continue to expand into the modern retail market through different formats, responding to consumer needs and growing demand for quality and food safety.
For IBL, the acquisition of a minority stake in Naivas marks the expansion of its conglomerate business model that spans 18 countries.
The company, which is listed on the Mauritius Stock Exchange, employs 25,000 people and operates in agriculture, energy, distribution, logistics, engineering, financial services and hospitality, among others.