U.S. giant bids for SA group

2010-09-28 00:00

GLOBAL retailer Walmart Stores has made a non-binding offer to buy local retailer Massmart — the owner of Game, Dion Wired, Builders Warehouse and others — for about R32 billion.

Massmart CEO Grant Pattison said Walmart has expressed interest to retain current management if the deal goes through, but it would fair to assume Massmart would subsequently delist from the JSE.

The proposed acquisition is part of Walmart’s strategy to move into Africa.

Massmart currently operates in 14 sub-Saharan Africa countries.

Andy Bond, Walmart’s executive vice-president responsible for Africa, said South Africa presents a compelling growth opportunity for the global retailer and offers a platform for growth and expansion in other African countries.

“South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy,” said Bond.

Massmart said that if a firm offer were received, its board would obtain an independent opinion and then express a view on the offer to shareholders.

The proposed offer is subject to a number of pre-conditions, including due diligence, which will commence immediately.

In order to satisfy these conditions, Walmart has granted Massmart a period of exclusivity .

“It’s a big vote of confidence for the South African retail economy and for South Africa,” said Syd Vianello, an analyst at Nedcor Securities.

“It also has lots and lots of pricing and competition implications for the South African retail industry. Walmart is the world’s largest retailer; it can source products cheaper than anyone else in the world,” Vianello said.

Doug McMillon, president and CEO of Walmart International, said: “We are continuing to deploy our strategy to accelerate growth and improve returns in our international business and this region of the world fits with our focus on large, high growth markets.”

Massmart said shareholders will be updated on November 8.

Massmart is Africa’s third largest distributor of consumer goods.

Walmart is a U.S.-based group that operates large discount department stores and a chain of warehouse stores.

DISCOUNT retail chain Game, which celebrated its 40th anniversary this year, opened its first store in Durban in 1970 in “cramped premises” in the city’s CBD, ringing up sales of R78 000 in its first month of trading. A second Game store was established on Durban’s Brickhill Road a year later and, by 1980, the company had six stores in KwaZulu-Natal.

There are now more than 90 stores in South Africa and in 10 other African countries, retailing 20 000 different products to over 45 million customers per year. In 2010, total Game sales will exceed R11,7 billion. The group employs about 11 000 people. Game spends one percent of after-tax profit on social responsibility initiatives. — Witness Reporter.

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