Walmart considers total takeover of Massmart South African business
As it gets ready to refocus on South Africa, Walmart Inc. intends to take Massmart Holdings private and raise the unit’s COO to the position of CEO. Massmart announced it reached a principle agreement with majority shareholder Walmart that could potentially see the US-based corporation acquire all of the company’s remaining shares in a deal worth R6.4 billion
The multinational retail giant intends to delist Massmart from Johannesburg’s main exchange by purchasing all outstanding shares of the company for R62 ($3.65) each, a 53% premium to the most recent closing price. After one year with the company, Jonathan Molapo, who joined Massmart in January as COO, will succeed Mitchell Slape, a longtime executive at Walmart.
“This represents a premium of 53% to the closing share price, a 68.7% premium to the 30-day volume weighted average price and a 62.4% premium to the 90-day volume weighted average price as at 26 August 2022,” Massmart said.
“In the event that the scheme does not become operative for whatever reason, a standby conditional general offer — which would run concurrently with the scheme — would be implemented for the same consideration.”
In 2011, Walmart acquired the majority of Massmart for R16.5 billion. Walmart had to fulfill a number of development obligations in order for the deal to be approved after the acquisition came under scrutiny from antitrust authorities. The latest bid from Walmart won’t need to get regulatory permission, though, given it already has the majority of the shares.
According to Slape, Walmart is “excited about the possibilities of Africa’s future and what it represents.” They are long-term investors and take a long-term perspective.
What the Deal Means for Walmart
As Amazon is reportedly expanding into Africa, Walmart has been prompted to get ready for more competition. The deal enables Walmart save money as the investment in Massmart, means they get to control brands including Makro and Builders.
Slape stated during a conference on Monday that there was no doubt that Amazon will strengthen competitiveness in the industry and increase customer offers.
“There is no question that Amazon is going to intensify competition in the market. We’ve been working hard to build our e-commerce business over the last few years. We think we’ll have a very competitive, very interesting offer for our consumers and you’ll see more of that in the coming months,” said Slape.
Walmart has been pulling out of low-growth markets and focusing on partnerships with or ownership shares in regional players. The business sold its operations in Argentina, Seiyu in Japan, and Asda in the UK.
“Basically, all markets outside of the US, they haven’t made an imprint,” Evan Walker, money manager at 36ONE Asset Management Ltd in Johannesburg, said. “It’s going to be interesting to see if they come out now very aggressively against other retailers from a buyer perspective.”