Wal-Mart to Buy 51% of Massmart - Analyst Blog

Wal-Mart Stores Inc (WMT) today announced its intention to acquire a 51% stake in the South African based consumer goods distributor Massmart Holdings Ltd. Wal-Mart has offered Massmart $2.4 billion (17 billion rand) or 148 rand per Massmart share, reflecting a 19.2% premium over the company's 30-day moving average price. The deal is subject to regulatory approvals. However, Massmart shares will continue to trade on the Johannesburg Stock Exchange.

In September 2010, Wal-Mart had initially announced its intention to buy Massmart. The proposed acquisition is in line with Wal-Mart's policy to accelerate growth and improve returns in its international business segment. Management believes that Africa is among the high growth developing markets of the world. Management states that the acquisition of Massmart will offer Wal-Mart a convincing growth opportunity, as South Africa comprises attractive market dynamics, encouraging demographic trends and a growing economy. 

Johannesburg-based Massmart is not only a leading distributor of consumer goods in Africa and but is also the largest retailer of general merchandise, liquor, home improvement equipment and supplies as well as the leading wholesaler of basic foods. The company currently operates 288 stores in 14 countries of sub-Saharan Africa. The company also has nine wholesale and retail chains and one buying group.

Wal-Mart's anti-union policies could see some headwind, since Massmart has a strong labor union, which has threatened to go on strike if required to underscore the position of labor at the company.

Rothschild and J.P. Morgan (JPM) are the joint financial advisors for Wal-Mart while Deutsche Bank (DB) and Goldman Sachs (GS) are the joint financial advisors for Massmart.

Based in Bentonville, Arkansas Wal-Mart Stores, Inc. operates retail stores in various formats across the world. The company conducts its business through three segments:  Wal-Mart U.S., International and Sam's Club.  The Wal-Mart U.S. division accounted for 63.8% of the company's fiscal 2010 net sales of $405 billion. The segment operates retail stores in different formats in the United States, in addition to Wal-Mart's online retail operations, walmart.com.

 
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