Wal-Mart considering smaller Massmart stake

[October 28, 2010]  NEW YORK (AP) -- Wal-Mart Stores Inc. is considering taking a smaller stake in South African retailer Massmart Holdings Ltd. to keep its listing on the Johannesburg Stock Exchange

Massmart said Thursday that the world's biggest retailer informed the company that it may now make a partial offer to buy more than 50 percent of the company for 148 rands ($21.06) per share.

In September Wal-Mart offered to buy all of Massmart for about $4.25 billion. The move was viewed as a way for Wal-Mart to jump-start growth beyond its sluggish U.S. business.

Massmart currently has 201.5 million shares outstanding, according to Thomson Reuters. The company, based in Johannesburg, runs about 290 stores in 13 countries in Africa, with most in South Africa. It also manages eight wholesale and retail chains under various brand names.

Massmart said Wal-Mart indicated that it spoke with major Massmart shareholders and key South African stakeholders about its proposed bid.

A deal with Massmart would give Wal-Mart an opening to expand in South Africa, a fast-growing economy but one that's also troubled by high crime and a 24 percent unemployment rate. It also has a heavily unionized work force.

While Wal-Mart has concentrated on overseas expansion, particularly in emerging markets, it had not indicated interest in South Africa until its September announcement about Massmart.

Massmart is Africa's third-largest distributor of consumer goods, the leading retailer of general merchandise, liquor and home improvement equipment and supplies and the leading wholesaler of basic foods. The company was founded in 1990 and operates chains including Game and Makro.

Wal-Mart's overseas business accounts for about 25 percent of its revenue, generating more than $100 billion in the fiscal year that ended Jan. 31. The retailer, based in Bentonville, Ark., has more than 8,400 locations in 15 countries. Its fiscal 2010 sales were $405 billion.

[Associated Press]

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