SOUTH AFRICA: Wal-Mart scales back bid for Massmart control
Wal-Mart has made a US$2.3bn bid for Massmart control
The world's largest retailer, Wal-Mart Stores Inc, has scaled back its plans to gain a foothold on the African continent after bidding US$2.3bn for a 51% stake in South African retailer Massmart Holdings.
Details of the offer announced today (29 November) come two months after Wal-Mart said it wanted to buy the whole of Massmart. But after talks with Massmart shareholders, it has now decided to table an offer for a majority stake.
The US retail giant has offered ZAR148 (US$20.7) a share for the 51% stake. Massmart said Wal-Mart had received irrevocable support from shareholders holding 35% of the company as well non-binding support from other shareholders representing some 15% of Massmart's existing issued share capital.
"We continue to be excited by the opportunity to invest in Massmart's business and to accelerate its growth and expansion in South Africa," said Doug McMillon, president and CEO of Wal-Mart international arm.
"The more we learn about South Africa and the surrounding countries the more we are convinced that this is an important region with attractive growth characteristics. This combination fits perfectly with our strategy to enter high growth markets in which we can apply our global expertise and generate strong returns."
However, Wal-Mart's move is facing scrutiny in South Africa, with the country's government setting up a panel to investigate the economic impact of the planned acquisition.
While Wal-Mart will gain control of the firm, it will also continue to be listed on the Johannesburg Stock Exchange, "enabling shareholders to continue to participate in future growth," Massmart says.
Wal-Mart executive vice president Andy Bond added: "In addition to supporting Massmart's growth strategy, we believe Wal-Mart can drive meaningful value through enhanced buying efficiencies, enhanced distribution and logistics capabilities and sharing of global best practices in retail formats and information technologies."
Massmart said independent financial advisor Morgan Stanley has reported that the terms of Wal-Mart's offer are fair from a financial point of view.
Massmart CEO Grant Pattison, described the deal as "a milestone," and a vote of confidence "in the strong growth potential of South Africa and the continent."
He added: "In gaining access to Walmart's experience and capabilities, we expect to be able to offer consumers an even wider selection of products that are competitively priced and more consistently available, delivering an improved customer experience across all our stores."
Johannesburg-based Massmart is one of the largest distributors of consumer goods on the African continent, with 290 outlets across 13 countries in Africa.
The majority of stores in its eight wholesale and retail chains are based in South Africa and operate under a variety of different brand names, selling home improvement equipment and supplies, food, and general merchandise, which includes basic apparel.
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