Nakumatt and Tuskys shares will be owned by a holding company to be formed as part of the merger deal between the two retailers.

The two, which control the retail business in the country, are currently reviewing the structure of the two businesses to facilitate the merger process, The Standard reported today, quoting an inside source.

“The new company will own all the shares of the two entities. It is still too early to know who will own what stake in the new entity, whose name has also not yet been agreed on,” the source told Standard.

Though details of the deal remain scanty given the secrecy that has characterised the family businesses, it is also understood that the two firms will leave a number of shares to be sold to a private investor at a later date.

“In the end, there will be a company whose shares will be owned by the two entities after it is determined what share each would own. This will allow the two firms to continue operating as separate entities,” said the source who is not authorised to comment on the negotiations.

He said the two families have engaged transaction advisers who are working on the deal before it is presented to the Competition Authority. Negotiations are also ongoing about the fate of the two retailers’ staff after the merger.

The retail chains issued the first joint statement last week confirming the merger talks but pointed out that the process was complex and would require some time to complete.

Cash flow crisis The merger is expected to offer Nakumatt Supermarkets a lifeline in dealing with a painful cash flow crisis and bringing back stock to its empty shelves. The deal is being described as a ‘homegrown solution’ to the retail chain’s troubles.

The entities last week formed a caretaker management team that comprises executives drawn from the two firms. Audit firm KPMG is providing transaction advisory services for the merger. In exchange, Tuskys, which still enjoys some supplier goodwill, will offer Nakumatt access to stock from its retail value chain.

The retailer’s current position is a far cry from its former stature when its ‘You Need It, We’ve Got It’ tagline promised shoppers a vast variety of goods. It had 66 branches in the region before it began closing them, weighed down by piling supplier debt and unpaid rent.

According to a recent report released by the Ministry of Industry and Trade, Nakumatt led in debts to suppliers, owing Sh278.9 million by December last year.