Massmart shareholders today voted in favour of the sale of a controlling stake in the company to US retailer Wal-Mart Stores. [hidepost=9][/hidepost]
The majority of shareholders backed the deal, which will see Wal-Mart acquire 51% of South Africa-based Massmart at a cash price of R148 per Massmart share. Moneyweb reports that South Africa’s High Court and Competition Commission still needs to approve the deal.
Massmart also has a presence in a number of other African countries. Bloomberg on Friday reported that Wal-Mart has applied to Zambia’s Competition and Consumer Protection Commission to buy Massmart’s operation in the southern African country.
Wal-Mart has over 4,300 outlets in the US as well as more than 4,200 stores in 14 other countries, including China, Japan, the United Kingdom, Brazil and India.
Andy Bond, Wal-Mart’s executive vice president for Africa, said earlier: “South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries. South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy.”
Massmart, headquartered in Johannesburg, is a distributor of consumer goods on the African continent and a retailer of general merchandise, home improvement equipment and supplies. Massmart is also a retailer of basic foods in the region. The company runs 290 stores in 13 countries in Africa, with the vast majority of its stores in South Africa, and manages eight wholesale and retail chains operating under a variety of different brand names.
If the deal goes ahead, The Palms Shopping Centre in Lagos (Nigeria), Lugogo Mall in Kampala (Uganda), Menlyn Park shopping centre in Pretoria (South Africa) and the Accra Mall in Accra (Ghana), together with numerous other locations, would each have a store that is “part of the Wal-Mart family”.
According to Massmart’s website, the company currently has 263 stores in South Africa and 25 outlets in other African countries. Outside of South Africa, the group has operations in Ghana, Malawi, Mauritius, Mozambique, Nigeria, Tanzania, Uganda, Zambia, Zimbabwe, Lesotho, Namibia and Botswana.
Massmart’s major brands include:
■Game (discount retailer of general merchandise and non-perishable groceries for home, leisure and business use)
■Dion Wired (middle- to upper-end electronics and appliances)
■Makro (large warehouse stores selling food, liquor and general merchandise to retail and wholesale customers)
■Builders Warehouse (offering home owners, DIY enthusiasts and building and maintenance contractors a comprehensive range of competitively priced products)
■Builders Express (products for home-owners, integrated into Builders Warehouse)
■Builders Trade Depot (catering mostly for medium- to large-sized contractors and tradesmen engaged in building, maintenance and renovation projects)
■CBW (wholesaler of food, liquor, groceries and cosmetics in bulk to independent general dealers, government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas)
■Jumbo (sells cosmetics, toiletries and hair-care products to individual consumers and independent general dealers)
■Shield (voluntary association that buys products in bulk on behalf of over 470 members who own wholesale or retail food businesses)
Outside of South Africa, Massmart’s footprint mainly comprises the Game stores, as well as Makro and CBW outlets in a few countries.
Jeanine van Zyl, a retail analyst at Old Mutual says that Massmart’s presence in Africa, outside of South Africa, is one of the major drawcards for Wal-Mart.
There has been speculation in the media that Wal-Mart also looked at pan-African supermarket group, Shoprite, as a possible take-over target.
Wal-Mart’s entry into Africa could potentially have a big effect on the continent’s exisiting retailers, from large supermarkets to street hawkers.
“There are certain categories where Wal-Mart will certainly be more competive than the established retailers,” says Van Zyl. “I think Wal-Mart will be able to bring down prices of general merchandise products such as electronics, basic clothing and sport equipment because they are able to procure from their global suppliers.
“They are one of the biggest clothing retailers in the world and have access to enormous buying power. But because Massmart doesn’t have a very good clothing footprint, I don’t see that as an immediate threat. It could be if Wal-Mart expands that category. We are, however, talking basic clothing not fashion clothing. So I don’t see any threat to [South African] fashion retailers such as Truworths or Foschini,” Van Zyl explains.
She says that in the food category it will take Wal-Mart some years to significantly bring down prices. “With food, in time they could improve what Massmart is currently doing and also maybe bring down margins. This will, however, only happen in time because what they would have to do to make that happen is to bring in their way of doing supply chain which could take a number of years.”