In what could potentially be Nakumatt Holdings’ last viable play, the retailer recently revealed it had filed an application with the Competition Authority of Kenya (CAK) seeking to install Tusker Mattresses (Tuskys) as its new operations manager.
According to Nakumatt’s Administrator Peter Kahi, “The success of the administration process, and ultimately turnaround of Nakumatt business, will be hinged on, among others, strategic retail stores management which we believe will be achieved through the appointment of Tusker Mattresses as an operating manager,” Mr. Kahi said.
The move comes less than two months after CAK rejected plans of the initial Tuskys and Nakumatt merger citing it was done under the wrong clause of the antitrust law. In a letter seen by the Business Daily, the regulator explained that the proposed transaction didn’t qualify as a merger since Nakumatt’s ownership wasn’t going to change.
Mr. Kahi explains that in its capacity as the operations manager, Tuskys is expected to provide specific technical services that will help stop further loss of market share by the giant retailer as a result of closing down multiple branches. “Among other services, Tusker Mattresses will provide day to day management oversight, procurement, finance, inventory and human resource management under the Administrators supervision.”
Taking into account the fact that Nakumatt owes more than Ksh. 30 billion to at least 90 creditors, any mishap in this new deal would more than likely prove disastrous for the retailer since the previous High Court ruling saved it from liquidation which most creditors had been in favor of.
In the initial merger proposal, Tuskys had revealed that it planned to loan Nakumatt up to Ksh. 650 million in order to offset a number of costs such as rent and salaries, and would also offer a payment guarantee of Ksh. 3 billion to suppliers.
Although on paper the merger may have seemed like a great idea, a number of interested parties had voiced their concerns over some of the potential outcomes. The court for instance argued that Nakumatt’s application hadn’t demonstrated a realistic avenue of getting back to its former glory while one businessman had written to the CAK in December raising concerns that Nakumatt could drag its problem to Tuskys thus creating a shockwave in Kenya’s retail sector.
What makes this whole ordeal particularly precarious is that documents filed before both the CAK and High Court reveal that even if Nakumatt was to be liquidated at the time the case was going on back in November, creditors would still be left with Ksh. 18.8 billion in unsettled debt.
With assets worth approximately Ksh. 32.9 billion back in February, liquidating Nakumatt would have settled all its debts and even leave it with a nice sum of about Ksh. 417 million illustrating just how much an impact a couple of months could have on a business.
Add this to the fact that Nakumatt has lost a number of prime store locations since its financial woes came to the limelight, this could end up having a substantial impact on its top and bottom line even if Tuskys gets the approval to become its operations manager.