CAK Statement on Kimo Kali Acquisition of Jumra, Sojpar and Raisons Distributors Limited
Competition Authority of Kenya (CAK) Statement On the acquisition Of Jumra Limited, Soljar Limited, and Raisons Distributors Limited by Kimo Kali Holdings Limited.
The Competition Authority of Kenya has approved the proposed acquisition of direct control of Jumra Limited, Soljar Limited, and Raisons Distributors Limited by Kimo Kalí Holdings Limited unconditionally.
This approval has been granted based on the finding that the transaction is unlikely to negatively impact competition in the market for FMCG in Kenya, nor elicit negative public interest concerns.
Kimo Kalí Holdings Limited, the acquiring undertaking, is a company incorporated by Twiga Holdings Limited. Twiga specializes in the wholesale distribution of fast-moving consumer goods (FMCG), leveraging technology, mobile phones, and efficient logistics.
Jumra Limited, the 1st target undertaking, is incorporated in Kenya. Jumra is operates in the business-to-business wholesale distribution of fast-moving consumer goods including foods and beverages, personal and hygiene, beauty and cosmetics, household cleaning and care, and stationery within Nairobi County.
Soljar Limited, the 2nd target undertaking, is incorporated in Kenya. It is involved in business-to-business wholesale distribution of FMCG products including; food and beverages, personal care and hygiene, beauty and cosmetics, household cleaning and care, and stationery within Siaya, Kisumu, Vihiga, Kakamega and Busia counties.
Raisons Distributors Limited, the 3rd Target undertaking is a limited liability company incorporated in Kenya. It is involved in the business-to-business (B2B) wholesale distribution of FMCG products including; food and beverages; personal care and hygiene; beauty and cosmetics; household cleaning and care; and stationery in Kwale, Mombasa, Kilifi, and Taita-Taveta counties.
The proposed transaction involves the acquisition of shares of Jumra, Soljar, and Raisons by Kimo Kalí. The transaction will enable Kimo Kalí to establish more efficient supply chains, lowering logistics costs, enhancing delivery times, and expanding access to previously underserved regions or customer segments.
The transaction qualified as a merger within the meaning of sections 2 and 41 of the Competition Act Cap 504 of the Laws of Kenya. The Act stipulates that a merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya. This may happen through, among others, purchase/lease of shares, exchange of shares, or vertical integration.
Further, merging parties whose combined turnover or assets, whichever is higher, is over KES 1 Billion are required to seek approval from the Authority prior to implementing the proposed transaction. The transaction Kimo Kalí, and Jumra, Soljar, and Raisons, met this threshold for mandatory notification and full analysis as provided in the Competition (General) Rules. 2019.
During merger analysis, and in order to determine the impact that a transaction will have on competition, the Authority identifies the relevant product market as well as the relevant geographical market.
The relevant product market comprises products/services that are interchangeable or substitutable by the consumer due to their characteristics, prices and/or intended use. Based on this criterion, the relevant product market for the proposed transaction is the markets for fast-moving consumer goods in Kenya
Determination of the relevant geographic market involves interrogating the area in which merging parties undertake business and where competition conditions are sufficiently similar. With regard to the proposed transaction, the parties provide their products and services countrywide. Therefore, the relevant geographic market is national.
The market for wholesale distribution of FMCG in Kenya consists of large distributors and wholesalers operating through both traditional brick-and-mortar channels and digital platforms. Insights from the Authority’s investigation into the proposed transaction indicate that the wholesale distribution market remains fragmented and far from saturation, presenting opportunities for growth and enhanced competition.
Some of the major players in Kenya are; Canini Haraka Enterprises Limited, Khetias, Gilanis, Mars Yetu, Kyosok Digital Services, Soljar, Twiga Foods Hashab Kenya (for Procter & Gamble), Mahlati Enterprises, RAA, Adamji Multi Supplies, Modern Holdings EA, Debonsham & Fear and Zanco. None of the player is noted as being dominant or having market power.
One criterion of assessing a merger’s impact on competition is their post-transaction market share. With regard to the proposed transaction, post-merger integration of the parties’ operations may give Twiga access to extensive market data which they can utilize to customize their services and leverage the target’s fleets to deliver their products widely, thus increasing the merged entity’s market share.
However, the Authority established that none of the parties has dominance or market power in distribution and wholesale of FMCG market. Therefore, the proposed transaction is unlikely to raise competition concerns.
In addition, it is the Authority’s view that the proposed transaction will not lead to substantial lessening or prevention of competition in the market for FMCG in Kenya.
During merger analysis, the Authority also considers the impact that a proposed transaction will have on public interest. Public interest in this case refers to various economically inclined concepts that, when considered, protect the welfare of the Public. In the Competition Act, some of the public interest considerations are:
a. extent to which a proposed merger would impact employment opportunities; b. impact on competitiveness of SMEs; c. impact on particular industries/sectors; and d. impact on the ability of national industries to compete in international markets.
As per the parties’ submissions, this transaction is not expected to raise public interest concerns. It entails an investment by the acquirer in the targets, without alteration to its management functions. Therefore, the merger is not expected to have an impact on access to the market by SMEs.
Premised on the above, the Authority approved the proposed acquisition of direct control of Jumra Limited, Soljar Limited, and Raisons Distributors Limited by Kimo Kalí Holdings Limited unconditionally.