CMC Deal Is Regional Springboard For Al Futtaim
Dubai-based conglomerate Al Futtaim Group has offered US$86mn to acquire Kenyan car retailer CMC Holdings , in what is likely to be the beginning of a regional expansion strategy for the group. BMI believes there are certainly growth opportunities on offer in Sub-Saharan Africa, where we expect vehicle ownership to increase from an average of 68 vehicles per 1,000 people to 90/1,000 by 2017. Moreover, CMC represents major truck brands, in markets where we expect the commercial vehicle (CV) segment to outperform.
CMC owns dealerships in Kenya, Tanzania and Uganda, which means this is not just a domestic demand play for Al Futtaim, it is also looking at the wider region. It is also looking beyond just CV potential, as CMC also has a number of passenger cars in its portfolio. However, this has been a more difficult business recently, as slow passenger car sales in Kenya in the run-up to the presidential elections contributed to a 59.0% year-on-year (y-o-y) decline in CMC's pre-tax profit in the first half of its financial year.
It has also lost the distribution rights to the Land Rover brand, which has dented sales. However, Al Futtaim has committed to bringing more brands to the CMC range. As yet it is not clear what these brands might be. Al Futtaim holds the rights to the Toyota and Lexus brands in Dubai, but Toyota has its own local unit in Kenya, which holds a 21% share of the passenger car market, as of H113. CMC currently holds an 11% share, but has recently lost ground to Mitsubishi's local dealer Simba Corp, which increased its market share from 11% to 17% on the back of a 67.5% y-o-y increase in sales in H113 (see CV Outperformance Shapes Competitive Landscape, August 22).
|Looking To Gain Ground|
|Kenya Vehicle Market Share H113 (%)|