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Nairobi - South African retailer Massmart is in talks to take a majority stake in Kenyan supermarket chain , as the unit of stores seeks a foothold in 's biggest economy.
Analysts said there was significant growth potential in the sub-Saharan African region, with 's economy is expected to grow about 6% this year from 5% last year.
Strong economic growth rates in in recent years have given rise to a new breed of consumers, helping drive up sales and catching the eye of global retailers such as , which acquired Massmart in a $2.4bn deal two years ago.
Massmart is expected to take a stake of 50% plus one share, said Chairperson , adding that both sides had yet to reach agreement on the price.
has 28 stores, fewer than its rivals, and , but Mukuha said it aims to open two more outlets by the end of the year.
Mukuha declined to give any financial details, including sales figures for , but rival Uchumi trades on a multiple of 11.6 times earnings, and the sector average is for 17.4 times earnings, according to Thomson Reuters data. Uchumi's annual sales rose by just under a third in 2012.
"They (Massmart) want to come in with a partner, someone who can show them how to navigate this market. On our part, we are looking for an investor to pump in fresh ideas, fresh blood," Mukuha said.
Massmart declined to comment on the stake, but its chief executive Grant Pattison said in an email last week that the company had "met with several important players in that market, building relationships."
But Nic Norman-Smith, chief investment officer of Lentus Asset Management in , cautioned that Massmart may have to pay a premium to get into , given the limited number of available retailers that would fit its business model.
"There is a lot of demand for these assets, I would be very surprised if they didn't overpay. If the price that paid for Massmart is anything to go by, they clearly have an appetite to grow at almost any cost," he said.
