Wal-mart To Acquire Massmart

Wal-Mart Stores Inc

Wal-Mart Stores Inc. is set to buy South African retailer Massmart Holdings Ltd. for a whopping amount of $4.25 billion in a bid to accelerate growth beyond its slow US business. This deal would also give Wal-Mart an exposure to the South African market, which in itself is a fast-growing economy.

''South Africa possesses attractive market dynamics, favorable demographic trends and a growing economy,'' Executive Vice President Andy Bond said in a statement. Wal-Mart has sourced products there but doesn't have a retail presence, company officials confirmed.

Wal-Mart said it would pay 148 rands ($21.11) per share for Massmart, which already has 201.5 million shares outstanding, according to Thomson Reuters. Shares of Massmart surged above Wal-Mart's offer to 149 rands ($21.29), or 10.6 percent on Monday.

Massmart is ranked as the third-largest distributor of consumer goods in Africa and the leading retailer of general merchandise, liquor and home improvement equipment and supplies and also as the wholesaler of basic foods.

Massmart, which is based in Johannesburg, runs 290 stores in 13 countries in the whole of Africa, with most of the stores in South Africa. Massmarts Game stores are Africa's largest discount chain, offering general merchandise and non-perishable groceries for home, leisure and business use.

At a press conference on Monday, Massmart CEO, Grant Pattison said about Wal-Mart that ''They're of course very interested in a strategy that includes the entire African continent and therefore have asked questions of Massmart about our operations outside of South Africa, which as you know is in several countries as far north as Nigeria and Ghana and as far east as Tanzania and Mauritius.''

Sean Ashton, an analyst from Johannesburg-based Investec Private Client Securities, said Massmart reported revenue of 47 billion rand (about $6.7 billion) in its last financial results. And its strategy is similar to the Wal-Mart model _ big box, warehouse-style retailing, he added. ''South Africa is a country that's still urbanizing, so we should see a continuing trend of the formal retailers gaining market share from informal ones,'' Ashton added.

But Brian Sozzi, an analyst with Wall Street Strategies, was skeptical. ''I'm surprised,'' Sozzi said. He added that digesting Massmart may be difficult because it has a ''huge portfolio of brands.'' And he believes with this deal, Wal-Mart is acknowledging it's going to be difficult to grow in the US.

by: White Digital Media

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