Walmart wants 51% of Massmart

Walmart executives say they prefer being a majority shareholder in Massmart than acquiring the entire company.

This week Massmart informed the market that it had received a written notice from Walmart of its firm intention to acquire 51% of Massmart, which owns Makro, Game, Dion Wired and Builders Warehouse.

According to Andy Bond, Walmart's executive vice-president responsible for UK and Africa operations, when Walmart executives spoke to other shareholders, they were told the shareholders wanted to share in Massmart's growth.

About 70% of Massmart's shareholders are foreign based with the London-based Aberdeen Asset Managers being the largest.

Earlier Aberdeen said that "maintaining a local listing seems an attractive proposition for minorities to consider. It would give investors the opportunity to participate in Massmart's future, alongside one of the strongest retailers in the world."

Bond said Walmart may buy Massmart shares on the open market, but this should not be read as Walmart's intention of acquiring 100% of the shares.

However, this was Walmart's strategy in Japan. It initially took a minority stake in Seiyu but slowly increased its shareholding and eventually acquired all of the group.

He said Walmart's deal with Massmart might be similar to that of Walmart de Mexico (WalMex), where Walmart controls 68% of the locally listed company.

The deal needs the support of 75% of shareholders and the approval of SA competition authorities.

Massmart CEO Grant Pattison said the offer was a sign of confidence in the local economy and could create new jobs.

"If approved, the transaction promises to be very positive for the regional economy, facilitating job creation, providing new opportunities for small and medium businesses and improving competitiveness," he said.

Massmart's executive board will be restructured, should the deal go ahead, with the head count being reduced from 13 members to nine.

Pattison and Guy Hayward, Massmart's chief financial officer, will remain as executive members, while seven will be non-executive directors. The non-executive team will comprise three directors from Walmart and the remaining four seats are reserved for independent non-executives who have yet to be named.

Bond said Walmart was still in discussions with Massmart founder and chairman Mark Lamberti about the composition of the board.

Walmart's acquisition of Massmart will give it exposure in 14 other African countries.

The SA Commercial, Catering and Allied Workers Union has threatened to go on strike if the deal goes ahead.

Pattison said in his communication with the union that it had not notified the company of its intention to strike. He added that the union had not sought the right to strike.