Monday, June 24, 2024

Choppies now in control of Kamoso as Competition Authority approves takeover

Local grocer Choppies is set to strengthen its grip on the retail sector, following a decision by the Competition and Consumer Authority (CCA) to permit the company to acquire Kamoso Africa. 

According to latest regulatory notice from CCA, the implementation of the proposed merger between Kamoso and Choppies Distribution Centre (directly controlled by Choppies Enterprise) will not result in any market share accretion for the merged Enterprise or any entity in the country. 

“The status quo of the relevant market will prevail post-merger and the Merged Enterprise will continue to face competition from the available rivals that exist in the retail as well as the distribution segment of the market, which is under consideration in Botswana,” reads part of the CCA merger approval notice. 

While the CCA has approved an acquisition of 76 percent, Choppies has in the recent past (March 2023) said that it has intentions to take full control of the Kamoso group. While the Choppies-Kamoso deal was first made public in January 2023, with Choppies proposing to acquire the approved 76 percent, a March cautionary note highlighted that the retailer wants to acquire 100 percent, which will include the 24 percent shares that are held by Botswana Development Corporation (BDC).

In 2020, BDC paid P239 million for the shares in Kamoso. It is not clear yet why the existing shareholders are disposing their shares. However, sources have indicated that the company has deep financial problems. Kamoso is one of Botswana’s leading fast moving consumer goods distributor. In addition to distribution, Kamoso owns a slew of businesses that include Liquorama, BuildersMart, Mediland, Mont Catering, Lemepe Milling, Real Water and TMB Tissues. 

In 2015, Choppies founders, Ramachandran Ottapathu and Farouk Ismail, sold their majority shareholding in Kamoso, disposing 72 percent to Stanchart PE and Development Capital Partners (DCP). The two international private equity firms paid $43.35 million (P452 million at the time) for the shares. 

Two years later, Stanchart PE and DCP, sold their 72 percent stake in Kamoso to another consortium of investors which included Investec Asset Management Private Equity and Rand Merchant Bank Ventures (RMB). According to Kamoso shareholder records, RMB is the largest shareholder at 45.17 percent, followed by Botswana Development Corporation (BDC) with 24 percent, Ottapathu owns 15.23 percent, while the Investec (now called Ninety One) holds 14.23 percent, and Narayan Ottapath has a 1.36 percent shareholding. 

Kamoso recorded a loss of about P190 million in 2021. The 2022 financial performance is yet to be made public. Though some observers are questioning the motives of the proposed transaction between Choppies and Kamoso, the retailer says the possible acquisition is aligned to the strategic intent of Choppies to expand its operations in the jurisdictions in which it currently operates, according to a statement from Choppies board of directors two months ago. 


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