US retail giant Walmart has concluded its R6.4 billion deal to acquire full ownership of Massmart, in which it first bought a 51% stake over a decade ago.
Walmart announced its intention to take over Massmart in August, saying that the deal would give Massmart access to the financial and operational support it needs to meet its growth objectives.
The decision came after years of waning profitability, especially in its Game stores stable, which consistently underperformed.
By August, when the takeover bid was announced, Massmart’s share price had shaved off close to 80% of its value since Walmart’s initial stake.
As of Tuesday (22 November), Massmart has been delisted from the JSE, as per its earlier announcement.
A ‘vote of confidence’
Walmart International CEO Judith Mckenna said the transaction displays a vote of confidence in both Massmart and South Africa.
“Walmart is excited to be able to build on the long-term commitment we have already made to our South African customers, associates, and partners,” Mckenna said.
“Most importantly, this transaction represents a positive vote of confidence in Massmart and in South Africa, which will allow us to continue to contribute meaningfully to future economic growth in the region,” said Mckenna.
When Walmart, the largest retailer in the globe first acquired 51% of Massmart in 2011, it viewed South Africa as a high-growth market and hoped to grow its presence in the country and spread to parts of the African continent.
But its efforts did not bear the results it had hoped for, despite implementing various strategic interventions, including the appointment of a Walmart executive from the US, Mitchell Slape, whose tenure as Massmart’s CEO lasted three years.
Standard Bank, which had acted as financial advisor and transaction sponsor to Massmart, said the deal would go a long way towards restoring investor confidence in South Africa.
“Walmart’s expertise and support will unlock significant growth opportunities for Massmart, which in turn have the potential to create jobs and develop local economies across the region,” said Michael Dempster, executive for advisory at Standard Bank Group.
Listen: Massmart CEO Mitchell Slape on why Walmart wanted to buy out and delist Massmart (or read the transcript)