6 November 2012

Kenya: Uchumi Plans to Tighten Grip On Kenyan Turf

Uchumi Supermarkets move to raise additional capital for its expansion plans is meant to tighten grip on its turf, prior to entry of international players in the Kenyan market.

The NSE-listed retailer on Friday said it intends to increase its authorised share capital from Sh2 billion to Sh3 billion by creating an additional 200 million nominal shares.

Half of these will be offered through a rights issue whose terms await regulatory approval. The resolution by its directors however awaits shareholder approval in a December AGM.

Uchumi intends to open at least seven outlets across Kenya, Uganda and Tanzania. It is expected to announce entry into Rwanda once it finally cross-lists.

"The expansion strategy is (meant) to protect its market share from local competitors as well as new ones. It knows the local market really well and current strategy is working," said Moses Waireri, a research analyst at Genghis Capital.

Uchumi disclosed intentions to cross-list in Uganda and Tanzania stock exchanges and Rwanda Over-the-Counter market, which is hoped to give it more scope in future cash calls.

"Cross-listing gives it a larger access of capital from the markets... (with an) increased shareholder number," said Waireri. South Africa's Massmart, in which American giant retailer Walmart has acquired majority stake, in July announced its entry into the Kenyan market with a Game store at the upcoming Garden City development on Thika Road in Nairobi's outskirts.

It already has stores in Uganda and Tanzania. Walmart's low-pricing strategy has created jitters among the country's top retailers - Nakumatt, Uchumi and Tuskys - who have largely relied on brand loyalty to safeguard their market shares.

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