Wal-Mart pursues South Africa retailer in $4.25 billion deal

by The City Wire staff ([email protected]) 28 views 

Bentonville-based Wal-Mart Stores Inc. has made a $4.25 billion offer to buy Johannesburg, South Africa-based Massmart Holdings, a retailer with 290 stores in 13 African countries.

The non-binding deal is subject to several regulatory hurdles. However, a successful transaction would increase the number of Wal-Mart retail stores/units by almost 3.5% and would build upon the company’s growing international sector. International sales for the first six months of Wal-Mart’s fiscal year totaled $50.931 billion, or 25.1% of total sales for the company. International sales in the first half of 2010 were up 15.9% compared to the 2009 period.

“The increase primarily resulted from growth in sales, especially from our operations in Mexico, and growth in the number of stores opened, particularly in Brazil and China,” Wal-Mart noted in its federal filing (10-Q) for the second quarter.

According to the Monday (Sept. 27) statement from Wal-Mart, Massmart is one of the largest distributors of consumer goods on the African continent and is the leading African retailer of general merchandise, home improvement equipment and supplies.  Massmart is also the market-leading retailer of basic foods in the region. The company operates 290 stores in 13 countries in Africa, with the majority of its stores in South Africa, and manages eight wholesale and retail chains operating under a variety of different brand names.

"We have the opportunity to leverage our experience from around the world to more effectively serve customers, create opportunities for our associates and add shareholder value,” Doug McMillon, president and CEO of Walmart International, said in the statement. “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. This potential combination with a market leader will enable us to add value to an already successful business through investments in people and technology.”

Wal-Mart operates more than 8,500 retail units under 55 different banners in 15 countries. With fiscal year 2010 sales of $405 billion and income of $14.335 billion, the company employs more than 2 million worldwide.

South Africa has a population of around 50 million, and its 2009 GDP of $488.6 billion ranked the country’s economy as the world’s 26th largest.

The following list shows the company’s international footprint as of Jan. 31, 2010.
• 43 units in Argentina
• 434 in Brazil
• 317 in Canada
• 252 in Chile
• 279 in China
• 170 in Costa Rica
• 77 in El Salvador
• 164 in Guatemala
• 53 in Honduras
• 1 in India
• 371 in Japan
• 1,469 in Mexico
• 55 in Nicaragua
• 371 in the United Kingdom

Wal-Mart shares (NYSE: WMT) closed Friday at $54.08. During the past 52 weeks the share price has ranged from a $56.27 high to a $47.77 low.