Wal-mart bid for SA Massmart is a vote of confidence in SA

Wal-Mart Stores Inc, has made an official offer to invest $2.1 billion for control of South Africa’s Massmart, a deal that would give the world’s most powerful retail store a primary foothold in fast-growing Africa.

The two companies said in a statement on Monday that Wal-Mart will pay 148 rand for a 51 percent stake in the South African low cost retail store, valuing the deal at 15.2 billion rand, as reported by Reuters calculations.

Wal-Mart said in September it had been thinking of buying nearly the entire South African retail outlet, however , scaled the offer back to more than 50 percent last month.

By taking 51 percent of Massmart, Wal-Mart is going to gain control of the firm and also keep it listed in Johannesburg Stock Exchange, which could have seemed critical to gaining regulatory authorization.

South Africa’s government last year scuppered a $24 billion tie-up deal involving local telecom MTN Group and India’s Bharti Airtel, as a result of dilemma that MTN would lose its local listing on the JSE.

The offer will in addition most likely put Wal-Mart, that has had long battled with organised labour in the United States, up against South Africa’s powerful trade unions.

The deputy general secretary of the South African Commercial, Catering and Allied Workers Union (SACCAWU) said this month that he was not able to eliminate the potential of a new strike in the event the deal went through.

The two organizations said Wal-Mart had received “irrevocable undertakings” from institutional investors holding 35.2 percent of Massmart stocks and options that they would likely vote in favour of the offer.

What’s more they have obtained non-binding letters of help and support coming from investors possessing around 15 percent of Massmart’s shares.

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