Walmart will acquire the outstanding shares of Massmart for an estimated $377.6 million, the company announced Monday (Aug. 29). The Bentonville-based retailer already owned 51% of the large Africa retailer. The original Massmart investment cost Walmart $2.3 billion in 2011.
The offer Walmart made for Massmart is 62 rand per share which is equal to about $3.68 per share. The offer represents almost a 53% premium to the share value as of Friday’s (Aug. 26) closing price, according to analysts. Walmart said it plans to delist Massmart from the Johannesburg Stock Exchange if the deal is approved.
Walmart also announced a new management change for Massmart at the end of December when CEO Mitch Slape left the company. Slape has run Massmart since 2019. Walmart said Slape’s departure is not related to the ongoing acquisition. Massmart’s Chief Operating Officer Jonathan Molapo will be the CEO and Slape will serve as a consultant through the transition.
Molapo was the CEO of Astron Energy before he joined Massmart in January, according to social media site LinkedIn. Massmart owns brands such as Makro, Game, Jumbo and Builders. Walmart said Slape initiated Massmart’s turnaround since taking over the business in September 2019 and led key initiatives to reduce expenses, revamp Game and launch an eCommerce investment program in 2021.
However, prolonged civil upheaval led to Massmart closing 43 stores in South Africa, a key market, in July 2021. Since that time the region has dealt with higher interest rates and a stalled economy. Massmart also began selling non-core assets in 2019 and Walmart injected $237 million into the business to aid with the turnaround in 2019.
Massmart reported in its semi-annual financial results a net loss of 903 million rand ($53.569 million). The loss was trimmed from 953 million rand lost in the year-ago period. Sales rose nearly 2% to 38.1 billion rand ($2.26 billion). The company said its most recent financial results show the ongoing underperformance of the group’s operating businesses, a trend the company says has continued over the last decade.
Another area of concern has been the lack of profitability amid the growth of Massmart’s e-commerce business after the acquisition of consumer goods retailer OneCart and increased ownership of delivery partner Wumdrop to 100%. Although the retail group reported a 50% year-on-year jump in e-commerce sales for the 26 weeks ending June 26, with orders increasing by 109%, Massmart produced an overall net loss of more than $59 million.