The world’s largest retailer, Wal-Mart has struggling South African chain Massmart Inc. in its sight in what would be Africa’s largest business deal in more than ten years at $4.2 billion.
Wal-Mart is vamping up international acquisitions in a bid to counter five consecutive quarterly falls in same-store sales in the US. As the biggest economy in Africa, South Africa is a good candidate for the retail giant to make inroads into the continent.
Wal-Mart’s offer is a generous one at nearly 10 percent higher than Massmart’s last closing price and a staggering 66 percent higher than the share price at the end of last year.
South African analysts see this as a huge vote of confidence for the South African economy and retail sector, but Wal-Mart would not make such an offer without expectations of generous gains in return. According to analyst Syd Vianello they obviously believe “they can do a hell of a lot more with Massmart.”
Massmart has a total of 290 stores, the majority of which are in South Africa, with a meager 24 of those stores in 12 other African countries. If the sale goes ahead it would be the largest purchase for Wal-Mart since the $11 billion deal to secure UK franchise Asda in 1999.
There is no certainty that the deal will go ahead, with Massmart CEO commenting, “It’s early days [and]we haven’t been in deep discussion,” but he affirms he has “no intention of not being part of any transaction.”
