Walmart announced today that it has made a cash offer of $2.32 billion (16.5 billion rand) to acquire a controlling 51 percent interest in South Africa's Massmart Holdings Ltd, its first venture into sub-Saharan Africa.
Walmart's interest in acquiring a share of Massmart was first announced to the market on 27 September. Andy Bond, executive vice president with responsibility for Walmart's operations in the region, 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 Walmart together will offer substantial benefits to Massmart customers, employees and shareholders, and will unlock new growth opportunities ahead. In addition to supporting Massmart's growth strategy, we believe Walmart 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."
"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," added Doug McMillon, president and chief executive of Wal-Mart International.
"This combination fits perfectly with our strategy to enter high-growth markets in which we can apply our global expertise and generate strong returns.”
The offer has been unanimously recommended by the Massmart board of directors. CEO Grant Pattison said the offer was a sign of confidence in the local economy and could create new jobs. "This is a milestone in Massmart's history and is a vote of confidence not only in Massmart and our employees, but also in the strong growth potential of South Africa and the continent.
"If approved, the transaction promises to be very positive for the regional economy, facilitating job creation, providing new opportunities for small and medium businesses and improving competitiveness.
"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.”
Walmart said 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. Walmart 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, Walmart said it will respect and honor all pre-existing contracts with organized labor bodies.
Massmart operates in 14 countries in sub-Saharan Africa through four divisions comprising 288 stores. Its wholesale and retail brands enjoy high recognition and include Makro, Game, Dion Wired, Builders Warehouse, Builders Express, Builders Trade Depot, CBW, Jumbo Cash and Carry and the Shield buying group.
Walmart said in a statement that Massmart will continue to trade on the Johannesburg Stock Exchange to provide Massmart shareholders with the ability to participate in the growth opportunity of the combined entity.
