In a notable development for Kenya's retail sector, Naivas, the country's largest supermarket chain, is poised for a foreign takeover as the family of its founder, Peter Mukuha Kago, prepares to sell an additional 11 per cent stake in the company.

The deal, estimated at $41.7 million (Sh5.8 billion), will allow foreign investors to gain controlling ownership of Naivas, signalling a significant shift in the ownership landscape of Kenya's retail industry.

This divestment by the Mukuha family marks the third time they have chosen to reduce their stake in Naivas, underscoring the company's impressive growth in profitability and market share.

The sale of shares has been revealed by IBL Group, a Mauritian conglomerate and part of the consortium that acquired a combined 40 per cent stake in Naivas last year.

"The … company will subscribe to additional shares in Mambo Retail Ltd. The proceeds of the subscription of shares will be utilized by Mambo Retail Ltd to acquire an additional 11 per cent in Naivas International ... the leading retail chain in Kenya, which will result in Mambo Retail Ltd holding 51 per cent of the shares in Naivas International Ltd.," stated IBL Group, disclosing their plans for the deal.

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Mambo Retail currently serves as the investment vehicle through which IBL, French fund Proparco, and German fund DEG hold their stake in Naivas International. Naivas International, in turn, fully owns the operating subsidiary Naivas Limited.

If the proposed transaction is successfully concluded, the Mukuha family's interest in the supermarket chain will decrease from the current 60 per cent to 49 per cent, positioning them as minority shareholders.

This move aligns with the strategic approach adopted by the Mukuha family's investment vehicle, Gakiwawa Family Investments, which has been gradually offloading its Naivas shares in recent years.

Unlike other local founders in the retail sector, who retained their stakes until the demise of their ventures, the Mukuhas have astutely capitalized on Naivas' success and rising value.

Previously, the Mukuha family held complete ownership of Naivas until 2020 when they sold a 31.5 per cent stake for Sh6 billion to a consortium comprising the International Finance Corporation (IFC), DEG, and private equity firms Amethis and MCB Equity Fund.

The proceeds from this transaction fueled Naivas' expansion across the country, while the Mukuhas' ownership decreased to 68.5 per cent.

However, as the supermarket operator continued to witness profitable growth, the value of their remaining shares soared.

In June of the same year, the IBL-led consortium acquired the 31.5 per cent stake held by IFC and its co-investors for $119.68 million (Sh16.8 billion).

Additionally, the consortium purchased an additional 8.5 per cent stake directly from the Mukuha family for $32.29 million (Sh4.5 billion), marking the first time the Mukuhas cashed out of their investment through the sale of shares.

With the new deal, the Mukuha family stands to receive at least Sh5.8 billion, based on last year's valuation.

This positions Naivas as one of the most valuable privately held companies in Kenya, surpassing the market capitalization of publicly traded companies such as BAT Kenya and Stanbic Holdings.

While specific details about the involvement of DEG and Proparco in providing new capital for the purchase of additional shares remain unclear, IBL currently holds an effective stake of 26.32 per cent in Naivas through its majority ownership of 65.8 per cent in Mambo Retail.

Proparco and DEG hold indirect interests of 8.29 per cent and 5.39 per cent, respectively.

DEG reinvested in Naivas alongside IBL immediately after being bought out along with earlier investors, including IFC and private equity funds.

With this impending foreign takeover of Naivas, Kenya's retail landscape undergoes a significant transformation, as the country's three largest supermarket chains will soon be under foreign control.

This development underscores the growing interest of international investors in Kenya's retail sector and highlights Naivas' remarkable ascent as a leading player in the industry.