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Walmart to acquire 51% of South African Massmart for US$2.4 billion

Last updated: 14:28 29 Nov 2010 EST, First published: 15:28 29 Nov 2010 EST

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Discount retailer Wal-Mart (NYSE: WMT) said Monday it has offered to acquire 51% of Massmart Holdings (JSE: MSM), a retail chain in South Africa, for ZAR148.00 (US$20.7) per share, or ZAR17 billion (US$2.4bn).

The cash offer represents a 19.2% premium to the 30-day volume weighted average price on  23 September, the last trading day prior to the first announcement of a potential deal.

Under the terms of the transaction, which has already been approved by Massmart's board, Massmart will continue to trade on the Johannesburg Stock Exchange and its shareholders will retain a 49% stake in the company.

Wal-Mart said it will work closely with local partners and farmers to grow the company and foster socio-economic development in the region.

"The more we learn about South Africa and the surrounding countries the more we are convinced that this is an important region with attractive growth characteristics," said Wal-Mart president and CEO Doug McMillon.

"This combination fits perfectly with our strategy to enter high growth markets in which we can apply our global expertise and generate strong returns. We hope to help South African suppliers grow their businesses, become more efficient, environmentally friendly and ultimately more competitive."

Massmart owns nine wholesale and retail chains, and one buying group, each focused on high-volume, low-margin and low-cost distribution of mainly branded consumer goods. The group operates in 14 countries in sub-Saharan Africa through four divisions, comprising 288 stores.

Massmart CEO Grant Pattison said he expects that Walmart's acquisition will allow his company to offer consumers a wider selection of products that are more consistently available.

"We reaffirm Walmart's commitment to honour existing union agreements and to maintain our Broad-Based Black Economic Empowerment credentials, working diligently with all parties to grow skills, create jobs in the retail industry, advance transformation and further socio-economic development initiatives," Pattison added.

The deal, which is to be implemented through a scheme of arrangement, is subject to 75% Massmart shareholder approval, as well as various South African regulatory approvals.

Walmart, which operates 8,692 retail units, reported fiscal 2010 sales of $405 billion.

As of 4:49pm in South Africa on Monday, Massmart was up 0.34% at ZAR142.18, while Walmart was down 0.4% at $53.52 as of 10:27am EST.

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