Wal-Mart’s interest in Massmart fades

JOHANNESBURG – Wal-Mart, the world’s biggest retailer, may scale back its US$4 billion bid for Massmart by nearly half, a move that could keep the South African firm listed in Johannesburg.

Wal-Mart is now considering taking more than a 50 per cent stake, rather than a full buyout, Massmart said in a statement yesterday.
The offer price was still R148 per share, Massmart said. Massmart is also set to take over Pupkewitz Megabuild pending a BEE transaction.
Shares of Massmart initially fell more than two per cent on the news before recouping some losses.
The shares were down 0,5 per cent at R140,76 rand, underperforming a 0,8 per cent gain in Johannesburg’s blue-chip Top-40 index.
Wal-Mart has been under increasing fire from its shareholders to revive its ailing US stores, and some analysts have said it should concentrate on fixing its business at home before spending big on expansion.
‘Wal-Mart is investigating potential options for and the merits of retaining Massmart’s listing,’ Massmart said. ‘These investigations could lead to Wal-Mart making a partial offer to acquire in excess of 50 per cent.’
The revised bid may also reflect dissatisfaction among Massmart’s shareholders at the deal, said Syd Vianello, an analyst at Nedcor Securities.
‘I think because of an increasing, call it, resistance to exit completely it looks like they have to go the route of a partial offer and retaining the listing on the JSE so that shareholders will be allowed to maintain their exposure to the company.’
Wal-Mart last month said it was in talks to acquire all of Massmart, a US$4 billion deal that would give the US retailer a big presence in fast-growing Africa and boost its emerging markets strategy. The bid values Massmart at 26,3 times its 12-month adjusted earnings per share, according to Thomson Reuters data.
Massmart sells general merchandise, electronics and food via a low-margin, high-volume model. It runs nearly 290 stores and nine different retail and wholesale chains. It has also been one of the most aggressive of South Africa’s retailers in expanding into the continent.
Wal-Mart’s intention to scale back its bid comes two weeks after HSBC pulled out of talks to buy a majority stake in South Africa’s Nedbank.
In May, Massmart bought the majority shareholding in Pupkewitz Megabuild. The acquisition is subject to approval by the Namibia Competition Commission (NCC). – Nampa-Reuters

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