Tycoon to pocket Sh700m to let go of Uchumi land

Troubled supermarket chain Uchumi may have to pay more than Sh700 million to a company associated with a wealthy controversial businessman from Ukambani.

This is from proceeds of an anticipated sale of a 20-acre prime piece of land in Kasarani area valued at Sh2.4 billion, which the retailer wants to dispose of.

Uchumi might end up paying Sidhi Investments Ltd if they reach an out-of-court settlement to sell the asset located near Thika Road Mall.

Though the politician-cum-businessman is not listed as a director of Sidhi Investments Ltd, well-placed sources told the Sunday Nation that he owns the company by proxy.

Uchumi CEO Julius Kipng’etich said no deal had been reached with the company but declined to speak about the case further.

The circumstances in which the land became contested between the businessman and the supermarket is in itself a statement of how successive leadership regimes have sunk Uchumi into a financial quagmire.

The case goes back to 2004 when the retailer found itself in dire financial straits similar to the one it finds itself in today as a result of mismanagement.   

At the time, the retailer decided to dispose of its non-core assets to pay creditors and improve liquidity, much like what it is currently doing.

Among the assets they had earmarked for selling was the 20-acre piece of land in Kasarani. After tendering, Sidhi emerged the highest bidder with a price of Sh186 million.

But the government, worried that Uchumi’s directors were engaged in stripping the company’s assets, placed a caveat on the land thus stopping the sale.

But by then, Sidhi was already in the process of paying Uchumi the requisite 10 per cent deposit amounting to Sh18.6 million.

This is where the story gets a bit convoluted. When Sidhi delivered the cheque for the deposit, Uchumi declined to receive it, citing the government caveat.

However, in 2005 Sidhi went to court to compel Uchumi to accept the deposit cheque and the balance.

Uchumi challenged this in court, saying that Sidhi did not have a binding sale agreement with them.

FRESH DEAL
However, the High Court in October 2007 found that there was a valid contract between Sidhi and Uchumi, thus paving the way for the former to pay.

Uchumi went to the Court of Appeal to challenge this ruling and the case is still being litigated upon.

Uchumi’s fear is that if they lose the appeal they will be forced to accept Sidhi’s initial offer of Sh186 million though the land is worth 15 times that amount today.

It is with this in mind that the company is trying to reach an out-of-court settlement with Sidhi. “It is just a practical way of looking at things,” said a source at the retailer who requested to speak in confidence.

During Uchumi’s annual general meeting that took place in January, the board was “authorised to negotiate and to do all things necessary to remove the existing caveat registered against the title deed of the Kasarani Property,” reads a statement released by the retailer.

Our sources said that the retailer has already identified a buyer for the land and only the caveat stands in the way.

The source said that initially the businessman had proposed to share the proceeds of the land on 50-50 basis – Sh1.2 billion each – which Uchumi rejected.

The board then made him a counter offer to share the proceeds on 70-30 basis in favour of the supermarket and sources say he is still mulling over it.

If he accepts the offer the businessman stands to pocket a cool Sh720 million out of nothing. Uchumi will pocket around Sh1.6 billion, a critical cash injection it needs to boost its operations.

The supermarket has had to close down several branches locally and in Uganda as well as sell several of its properties as it tries to revive its declining fortunes.

It recently sold off a piece of land in Ngong Hyper to pay off a Sh900 million loan owed to Kenya Commercial Bank.

It is also negotiating for a Sh1.5 billion loan from the Treasury to lift itself out of the Sh6.1 billion debt it is mired in.