Book value

Naivas is valued at 10 times its book value in a blockbuster transaction

Companies

Naivas is valued at 10 times its book value in a blockbuster transaction


Naivas Supermarket along Muindi Mbingu Street in Nairobi. PICTURES | EVANS HABIL | NMG

The sale of a 40% stake in the Naivas supermarket in June to a consortium of international investors valued the chain at 10 times its book value, making it one of the largest bounties paid to local businesses in recent years. last years.

Disclosures from Mauritian conglomerate IBL Group – which led the buying consortium – show the deal valued Naivas Limited at 45.6 billion shillings, 10 times the value of its net assets of 4.56 billion shillings at the end of June. 2021.

Naivas recorded sales of 65.1 billion shillings in the financial year ended June 2021, while its net profit was 2 billion shillings, representing a net margin of 3.18%. This is an improvement on the previous year, when it made a net profit of 1 billion shillings on sales of 54 billion shillings, or a net margin of 1.9%.

IBL pointed to the competitive bidding for the stake – highlighting the retailer’s attractiveness to international investors despite the relatively low net margin – which could also explain the high premium paid relative to the chain’s book value.

Other recent takeovers in the country, particularly in the banking sector, have tended to come with a much lower premium on price-to-book multiples.

“The acquisition price was determined with reference to an earnings multiple and negotiations between the respective parties through a competitive bidding process,” IBL said in a circular to its shareholders.

Through an investment vehicle called Mambo Retail, IBL, together with French and German development finance institutions Proparco and DEG, paid a total of $151.97 million (18.25 billion shillings ) for the minority stake.

They bought part of the stake (31.5%) from another group of investors consisting of the International Finance Corporation (IFC), private equity firms Amethis and MCB Equity Fund and DEG, for whom the transaction has marked a simultaneous exit and re-entry in Naivas.

The IFC Group paid 6 billion shillings for its stake in 2020, which it held for only two years before selling it to the IBL consortium for 119.68 million dollars (14.4 billion shillings), which has more than doubled its expenses.

The family of Naivas founder Peter Mukuha Kago, through his investment vehicle Gakiwawa Family, also sold an 8.5% stake to the IBL consortium in the deal, pocketing approximately $32.3 million. (3.8 billion shillings) and retaining a 60% share of the business. .

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