French fund Proparco has acquired a $31.5 million Naivas stake: As part of a group that will eventually own 40% of the retailer, the French sovereign wealth fund Proparco has invested $31.5 million (Sh3.7 billion) in the grocery chain Naivas.
Without disclosing the specifics of the proposed transaction, such as the stake to be purchased, Naivas had previously stated that Proparco, Mauritian conglomerate IBL Group, and German sovereign wealth fund DEG were purchasing a minority investment in the company.
A group of investors, including the International Finance Corporation (IFC) of the World Bank, MCB Equity Fund, Amethis, and German sovereign wealth fund DEG, which bought the shares in the retailed for Sh6 billion in April 2020, are acquiring holdings in the company.
The transaction highlights Naivas’ value as a leading draw for private equity funds in Kenya’s retail market, which is now vacant following the recent demise of one of the country’s key competitors.
In a statement, the French fund said, “Proparco is pleased to announce its partnership with IBL Group, the biggest conglomerate in Mauritius [and] DEG… to jointly purchase a 40% investment in Naivas International, which controls 100% of the shares of Naivas Limited.”
Proparco stated that it will contribute $31.5 million in the capital (Sh3.7 billion).
It is unclear if the three institutional investors will receive an equal share of the 40% ownership.
The Sh6 billion that IFC, Amethis, and DEG spent to purchase the 30% share in Naivas has been disclosed by the parties as being a very small portion of the deal.
While also rejoining the retailer’s shareholder list as a member of the new consortium, DEG is withdrawing its initial investment from Naivas.
It is unclear if the founders—the family of the late businessman Peter Mukuha Kago—are selling additional shares alongside the institutional investors or if the IFC consortium had purchased an additional 10% stake in the company.
If Proparco and its partners are spending the same amount, then Naivas will be worth Sh27.8 billion after paying Sh11.1 billion for the acquisition of the 40 percent interest.
The retailer’s valuation has improved as a result of its ambitious national expansion since the IFC consortium’s entry valued Naivas at Sh20 billion in 2020.
The current arrangement will see the IFC consortium earn a return on its two-year investment, in contrast to the former transaction when Naivas received expansion money.
In response to questions from Business Daily, Naivas stated, “We have sufficient resources to fund our future expansion.
IBL previously stated that this was the largest deal it had ever completed.
The largest investment in IBL’s history, according to the multinational, was made in Naivas International, which owns the retail chain.
For institutional investors, who normally hold enterprises for seven years or more, the IFC consortium’s withdrawal marks an exceptionally brief investment tenure.
IBL claims that the proposed purchase will provide them with a base from which to make additional investments in East Africa, noting that Naivas has significantly expanded its operations to solidify its position as the largest supermarket operator in the nation.
IBL’s chief executive, Arnaud Lagesse, said in a statement: “This family business, founded in 1990, is an example of a success story that has continued to develop despite the pandemic thanks to its robust business model.”
“With 84 shops spread over 20 cities and towns in Kenya, it has made contemporary food retail accessible to everybody. In particular, Naivas supports the Kenyan economy by employing around 8,000 people.
IBL, which manages the Winners grocery chain in Mauritius, has experience in the retail industry, Mr. Lagesse continued.
Naivas has developed into one of Kenya’s top businesses in terms of employment and sales.
Intending to increase it to $1 billion (Sh117 billion) in the following fiscal year, the store expects to conclude the current fiscal year with a gross turnover of $860 million (Sh101 billion).
The retailer had 60 locations before the IFC group invested in it. The business used the proceeds from the share sale to expand, particularly by occupying space left vacant by rivals Nakumatt Holdings and Tusker Mattresses Limited, both of which had either failed or were in financial difficulty (the owner of Tuskys brand).
Quick Mart, which had 51 stores as of April, is Naivas’ main competition in terms of the branch network. Following an investment from Africa-focused Adenia Partners, Quick Mart has also been growing quickly.
Carrefour Kenya has an estimated 16 branches, through which it generated a significant income of Sh33 billion last year. It benefits from significantly higher spending per shopper in wealthier areas.
“Our shareholders have formed an exciting alliance that will propel us into the next stage of growth. The managing director of Naivas, David Kimani, issued a statement saying, “We appreciate the great knowledge and capacity that IBL brings to the table in the retail market.
According to Proparco, Naivas will keep growing in the contemporary retail sector using a variety of forms to meet the demands of consumers and meet the rising standards for food quality and safety.
IBL’s conglomerate business model, which currently operates in 18 countries, has been expanded with the purchase of a minority position in Naivas.
With 25,000 employees and operations in industries including agricultural, energy, distribution, logistics, engineering, financial services, and hotels, the corporation is listed on the Mauritius Stock Exchange.