The International Finance Corporation (IFC), which is the World Bank’s private lending arm, is set to acquire a minority stake in retail chain Naivas Limited for $15 million (KSh1.5 billion).
IFC is part of a consortium of investors, including PE fund French private equity firm Amethis, Deutsche Investitions-und Entwicklungsgesellschaft (DEG), a German Development Finance Institution, and Mauritian Commercial Bank (MCB) Fund, that will invest in the retailer.
Registered in 1990, Naivas Supermarket is a leading Kenyan retailer with 63 outlets as of March 2020.
The company name was changed later to Naivasha Self Service Stores Limited, before re-branding to the current Naivas Limited, in 2007.
“IFC seeks to make an equity investment alongside Amethis which will result in a minority stake in the company,” IFC said in a disclosure.
“Naivas is majority-owned by the Mukuha family who as part of this transaction will dispose part of their shareholding to a special purpose vehicle owned by IFC, Amethis and other co-investors. The Mukuha family will remain in the business as the main shareholders.”
The late Naivas Chair, Simon Mukuha held a 25% stake in the supermarket’s ownership.
His brother, Kimani, owns a similar 25% while two of their sisters, Linet Wairimu and Grace Wambui, own 15% each.
The remaining 20% is owned by the estate of Peter Kago, their late father.
According to IFC, its investment is expected to help the company optimise business operations and further strengthen its corporate governance structures.
“IFC will provide a food safety advisory programme that will ensure that the company complies with the Global Good Agriculture Practice (GGAP) that is more stringent than local standards.
IFC will also help the company improve environmental and social (E&S) standards across its operations.”
Cytonn Investments comments that, “The move by IFC is an indication of investor confidence in Kenya’s retail market and the retailer, in the wake of increasing competition with the entry and expansion of international brands, even as some of its peers struggle to remain in business.”
According to Rand Merchant Bank (RMB)’s Where to Invest in Africa 2020, “Retail in Africa is all about playing the long game.”
RMB says besides a slow-growing middle class, the potential is still evident in the numbers. “The current 350-million-strong middle class is expected to grow to just under one billion by 2040.”
For Kenya, RMB says although the competition for retailers is highest in Kenya, its volume of consumer spending is the largest in East Africa, due especially to improvements in distributions systems, supported by innovative ICT initiatives.
“Establishing relationships with local partners will connect investors to the rest of the EAC.”