Uchumi Supermarkets is in talks with a private-equity fund and other investors over a potential capital injection that could help the troubled supermarket chain survive a cash crunch.
“We’re following different channels of financing,” acting Chief Executive Officer Mohamed Mohamed said in an interview in Nairobi, declining to name potential suitors.
“Where Uchumi is right now, it needs some cash almost immediately. We are looking for a financial investor.”
The 42-year-old grocer and rival Nakumatt Holdings have had their market invaded by international retailers such as Carrefour of France, SA’s Shoprite Holdings and Botswana-based Choppies Enterprises as they try to recover from corporate governance challenges.
Uchumi has closed down half of its stores in a shake-up that started three years ago and also saw the departure of some of the firm’s top executives, including its CEO and chief financial officer.
Uchumi needs to raise as much as Ksh 7 billion in 2018 to hold off the competition, of which at least Ksh 4 billion is needed soon, Mohamed said.
It also wants to use some of the cash to roll out e-commerce, franchises and convenience stores, rather than only relying on hypermarkets, he said.
The unprofitable chain store expects to reach a decision this week on whether it will go ahead with the sale of a 8-hectare piece of land valued at Ksh 3 billion, he said.
The board will consider whether to sell parcels of the plot or dispose of it entirely.
The company will get a 10% deposit of the price immediately on finalising a sale agreement, which will give “comfort to some creditors”, Mohamed said. “We’re reviewing the full impact of those offers as well as the best ways of optimising the land.”
Uchumi has sold assets to reduce costs. Two stores it recently exited accounted for 42% of rental expenses of Ksh 55 million. The company is renegotiating leases, reducing floor space, or subletting to specialty stores, he said.
“We are looking at other loss-making areas and getting rid of them to stop the b******g,” Mohamed said.
“Looking at our financial situation, it would be prudent to relook at where we want to play, which line of business we want to pursue. E-commerce is an important aspect of where we want to play,” he said.
Uchumi has struggled since it emerged from bankruptcy in March 2010. It went into receivership five years earlier with debt of Ksh 2.2 billion, which was either cleared or converted into shares.
Its share price has plummeted 48% to Ksh 2.40 on Nairobi Securities Exchange.