Wal-Mart makes offer for 51% of Massmart
Nov 29 2010
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Wal-Mart, the world’s biggest retailer, said it is looking forward to completing the purchase of a 51% stake in Johannesburg-based Massmart , after tabling a firm offer valued at about R17bn.

The price of R148 a share is unchanged from the price that Bentonville, Arkansas-based company made in September, but today's offer is for a majority stake, rather than the full control that Wal-Mart originally sought. It revised its plans after opposition from institutional shareholders who made it clear they were unwilling to forgo their stake in the South African retailer's future growth at the price offered. Board recommendation for the offer follows an assessment by investment bank Morgan Stanley.

"The due diligence effort we have conducted over the last eight weeks has underlined our confidence that this is a compelling combination that will create significant value for both companies, and we look forward to participating in the regulatory process to complete this acquisition," said Andy Bond, Wal-Mart’s Executive Vice President with responsibility for the UK and Africa, in a statement.

The deal still requires 75% shareholder support and approval by competition authorities. The Competition Commission is currently carrying out its assessment of the proposed transaction. In the new year the Competition Tribunal will hold public hearings before making a decision whether to approve unconditionally, approve with conditions or block, the deal.

The offer documents are expected to be mailed to Massmart’s shareholders by December 9, 2010, Wal-Mart said in a statement.

"The offer is very fair to existing shareholders who can both realise some value and obtain the opportunity to co-invest with Wal-Mart. We are confident that the proposed transaction will enhance the Group’s prospects and growth, with obvious benefits to current and prospective stakeholders. Together these factors made it easy for the Board to make a unanimous recommendation of the offer to shareholders," Massmart Chairman and founder Mark Lamberti said in a statement.

Wal-Mart said it is looking forward to using SA as a step to expand into other African markets.

"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," President and CEO of Wal-Mart International Doug McMillon said in a statement.

In the face of a growing union-led anti-Walmart campaign, which seeks to place a number of conditions on the deal if it is approved, the US company repeated earlier statements that it intends to respect Massmart’s existing trade union relationships and black economic empowerment efforts. It also repeated earlier statements about the benefits it would bring to local suppliers and farmers.

"This acquisition will allow us to bring to SA our significant experience in connecting small farmers with Wal-Mart’s global supply chain, boosting farmer income as well as helping them improve the quality of their produce. We hope to help South African suppliers grow their businesses, become more efficient, environmentally friendly and ultimately more competitive," Mr McMillon said.

Despite wishes expressed by the South African Commercial Catering and Allied Workers Union (Saccawu) for guaranteed levels of local procurement, the company made it clear it will do things its own way.

"Wal-Mart can drive meaningful value creation through enhanced buying efficiencies, expanded distribution and logistics capabilities and sharing of global best practices in retail formats and information technologies," Mr Bond said.

Source: www.businessday.co.za, 29 November 2010

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