S. Africa: Walmart offers to buy Massmart in a $377m deal

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Walmart Inc. (WMT.N), a major American retailer, has made a 6.4 billion rand ($377.6 million) bid for the 47% of Massmart (MSMJ.J) shares it does not already own. Massmart said that this acquisition will help to restructure the South African company, which is currently making losses.

After Massmart announced the deal, its stock increased by 46%. The retailer would be taken off the Johannesburg Stock Exchange if shareholders approve it.

For every outstanding Massmart share, Walmart has offered 62 rand, a premium of 53% over the stock’s Friday closing price, according to Massmart.

The American retailer has had to give Massmart’s companies an increasing amount of financial and operational help ever since gaining majority control of the company in 2010.

A recovery strategy was implemented by Massmart’s management in 2019 that included selling non-core assets, eliminating fresh food from its Game stores, and reducing expenses across the group.

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However, the turnaround plan has been hindered by issues like the COVID-19 pandemic and the instability in 2021, according to Massmart.

If approved, “The potential offer, if finalised, will provide Massmart with needed access to ongoing financial and operational support from Walmart to sustain the group’s turnaround,” the statement continued.

An independent expert’s preliminary analysis shows that the terms and conditions of the offer are fair and reasonable, Massmart Chairman Kuseni Dlamini told reporters in a call.

From a loss of 358.5 million rand a year earlier, the store reported a headline loss of 903.5 million rand ($53.2 million) in the 26 weeks that ended on June 26.

[$1 = 16.9507 rand]