Uchumi Reopens but will it be re-listed?
Uchumi will have a tough time getting re-listed UNLESS the CMA bends the rules & regulations.
Nevertheless, the CMA can redeem its image by thinking out of the box by allowing Uchumi on the NSE as an AIMS (Alternative Investment Market) listing but WARNING to ALL that there are risks involved & the exceptional circumstances for the re-listing.
For the relisting, either Uchumi will have to either come out of receivership OR the shares will trade even though it remains under receivership. In the latter, the ordinary shareholders will have no say (i.e. voting rights) since the receiver has the "control".
It is not a crime to be STUPID so those who buy into Uchumi should be made aware of the risks.
Uchumi might become another NBK story i.e. just as NBK will take at least another 2 years to pay dividends (unless the government "rescues" it), Uchumi will be in the same spot. It will be a slow but necessary part of Uchumi becoming a firm capable of moving to the Main Board of the NSE.
Good news: Uchumi will not have to pay income taxes on its profits for many years & that means it gets to keep more of the cash! Nakumatt will be forced to pay income taxes considering it is profitable & under greater scrutiny. A strategic investor could shield profits by doing a Reverse takeover.
Ironically, Nakumatt will probably list in 2009 which is in line with the earliest Uchumi will be profitable. I wonder which will cause more excitement in the market?
A better option is to start shopping Uchumi to the highest bidder asap i.e. while in receivership, it is easier to negotiate the sale of a huge chunk to a strategic investor.... that could be Sameer, local outfit like Tesco (which had franchised some stores but not in kituyi's good books), foreign chain...
This would re-energize the brand while providing a "real" lifeline that puts real cash behind the name thus ensuring suppliers will fully be on board. Other "large" suppliers including Mumias, EABL, Unilever, Bidco, etc should be allowed to take up either preference shares or ordinary shares to lend the "cash" support OR convert debt into equity.
Yes, I am recommending a recapitalisation via another RIGHTS issue but restricted to corporates to keep costs low but raise the maximum asap. They could be issued a different class of shares that have preference over current shares thus encouraging the investment.
Uchumi should be allowed to float Commercial Paper esp to pay its suppliers. The suppliers earn interest while Uchumi buys time with increased cash flow. The government should do its part accept Uchumi's CP in lieu of taxes for 2 years!
Without the tough BOLD moves, Uchumi will die a slow death again...
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