A Kenyan family's feud over whether their supermarket chain is or is not a family business has not yet derailed a deal to sell a controlling stake to an outside investor, with a court giving the green light for the deal.
Newton Kagiha, a disinherited son of Peter Mukuha Kago, applied for an injunction from the high court to block the sale of the family’s Naivas supermarket chain while a dispute over inheritance was resolved.
South African conglomerate Massmart, majority owned by US family business Walmart, is mulling a 51% stake in the chain, which was founded by his father and is now owned by four of his siblings. It is reportedly worth $70 million (€53 million).
But a high court judge has given the deal the go-ahead on the grounds an injunction would discourage foreign direct investment in the country.
It’s not known whether Kagiha will appeal the judge’s decision.
Naivas' 28 stores offer a valuable opportunity for Massmart to get a foothold in Kenya – one of the fastest growing markets in eastern Africa.
Massmart already operates in 12 African countries, and saw revenues of R2.7 billion (€198.5 million) in fiscal 2012. Naivas is one of 3 Kenyan family supermarket businesses the company is looking to buy; the others include Tuskys and Nakumatt.
Naivas is run by four of the founder’s nine children. In an inheritance case, Kagiha argued the company was a family business, and he was therefore entitled to benefit from the impending deal.
However his siblings argued that although the business was family owned it had always been run as a private, limited liability company rather than a traditional family business.
Two second-gen brothers, Simon Gashwe and David Kimani, fill the two director roles at Naivas, while their two sisters, Grace Wambui and Linnet Wairimu, hold senior management positions.
The two brothers originally held 25% stakes in the business, while the two sisters held 15% each. Upon their father's death in 2010 his 20% stake was divided between the four.
Kagiha is battling for a 20% stake in the business, saying in court he provided 20% of the seed capital when the business opened in 1990. He also accused Gashwe of cheating him out of his portion of his father's shares.
Gashwe said Kagiha had lost the right to be a shareholder in the business after embezzling assets from Rongai Self-Service Store – the original incarnation of Naivas.
He was charged of misdirecting KES 230,000 (€1,990) in the early 1990s, although his siblings withdrew the case when their father intervened. Kagiha is also accused by Gashwe of mismanaging other businesses belonging to the family, and of owing family members large sums.
The inheritance case has been adjourned until 11 November.