Walton family announces plan keep Wal-Mart ownership near 50%

The Walton Family plans to divest roughly 6% of its majority stake in Wal-Mart Stores over the next few years into a new trust entity as the family's interest has risen to more than 50% in recent years from corporate funded share repurchases.

The family's interest stood at roughly 50.32% on Feb. 6, according to recent federal filings with the Securities and Exchange Commission. But with some $10.3 billion in additionally planned buybacks by the company the family's interest will continue to rise. If Wal-Mart were to repurchase shares of other holders without also acquiring shares from Walton Enterprises, the percentage of Walton ownership would grow beyond 50%.

Shares owned by Walton Family Enterprises will be methodically divested overtime into a new entity — Walton Family Holdings Trust — which intends to fund charitable initiatives and also keeping the family's direct ownership of Wal-Mart Stores at no more than 50%. The planned 6% transfer is valued at roughly $15.6 billion and amounts to some 193.5 million shares as of Friday.

The family notes that this move " is consistent with an appropriate balance of family and non-family ownership that supports the goals of all Wal-Mart shareholders and long term business success," according to a statement made to shareholders on Friday (April 10).

Wal-Mart Stores is one of eight family owned Fortune 500 companies and is deemed a controlled company given the founder’s family owns at least 50% of the outstanding shares. Friday’s news does not change that fact. Rob Walton, son of the founders Sam and Helen, remains board chairman and his son-in-law, Greg Penner was named vice chairman and Walton’s chosen successor at last’s years shareholder meeting (June 6.)

That announcement answered the question many had about who might take over board leadership when the 70-year-old Rob Walton steps down. Rob Walton’s departure and a more independent board is something minority shareholders have advocated for in recent years following the alleged bribery scandal in the retailer’s international segment, which is still under investigation.

Wal-Mart is often in the center of a battle between Wal-Mart insiders and any number of outside groups seeking change from and within the family control through various shareholder proposals each year. Corporate governance expert Alan Ellstrand at the University of Arkansas said closely held corporations maintain control over the governance process by helping to ensure that minority shareholder proposals have little chance of being adopted. 

In addition, Ellstrand said this provides insurance to maintain near complete control of directors to serve on the board. Even with dispersed ownership in companies like Wal-Mart renegade directors are never elected, but it can be embarrassing to firms when such candidates receive even a significant minority vote. He said having control of the stock also ensures that the family can influence some control over the firm’s strategic agenda like choosing a CEO who will carry out their plan, Ellstrand said.

“I believe that the Walton family is concerned about their shareholding becoming too dominant – they are likely sensitive to ensuring that Wal-Mart continues as a publicly traded firm in every sense, and that the stock continues to be a dynamic, widely traded investment,” Ellstrand said.

Analysts said investors know on the front end, that the Walton Family controls the company from the board room by handpicking a CEO who will most align with Sam Walton’s mission. While there have been ups and downs for the retailer over the years Wal-Mart Stores remains one of the best performing companies among its peers in the Fortune 100.

Wal-Mart shares (NYSE: WMT) closed Friday at $80.65, down 19 cents. During the past 52 weeks the share price has ranged from a $90.97 high to a $72.61 low.