Wal-Mart confirms offer to acquire 51% of Massmart

US-based retailer Wal-Mart Stores announced today that it has offered to acquire 51% of the shares of South Africa’s Massmart. If the deal goes ahead, Massmart will continue to trade on the Johannesburg Stock Exchange.

At the end of September 2010, Wal-Mart announced that it has made a preliminary, non-binding proposal to acquire Massmart.

Andy Bond, executive vice president with responsibility for Wal-Mart’s operations in the region, including the United Kingdom and Africa, commented: “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. Importantly, we believe bringing Massmart and Wal-Mart together will offer substantial benefits to Massmart customers, employees and shareholders, and will unlock new growth opportunities ahead.”

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.

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.

According to Massmart’s website, the company currently has 232 stores in South Africa and 24 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.

Doug McMillon, president and CEO of Wal-Mart International, said: “We continue to be excited by the opportunity to invest in Massmart’s business and to accelerate its growth and expansion in South Africa. 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. Also, this acquisition will allow us to bring to South Africa our significant experience in connecting small farmers with Wal-Mart’s global supply chain, boosting farmer income as well has 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,” he added.

Wal-Mart said in a statement “that it fully understands and is supportive of the constructive position that Massmart has taken on Broad Based Black Economic Empowerment (BEE), and expects to broaden and accelerate these efforts.

“Wal-Mart also intends to work closely with local partners to grow skills and foster socio-economic development in the region, and by so doing, to be a corporate and retail role model. Further, Wal-Mart will respect and honor all pre-existing contracts with organised labour bodies,” the company added.

The offer remains subject to acceptance by Massmart’s shareholders, as well as certain customary conditions and relevant regulatory approvals in South Africa.