Retail giant Wal-Mart Stores Inc. has added another feather in its cap by buying out Massmart partially, the leading African retailer of general merchandise and home improvement equipment supplier.
On June 20, 2011, the Bentonville, Arkansas based Walmart announced that it has acquired 51 per cent stake of Massmart for $2.4 billion. The deal has paved the way for the U.S multinational’s expansion into the potential African markets. With the help of Massmart Wal-mart will gain access to 50 million South African consumers scattered across more than a dozen African countries.
Analysts feel that the merger is, from a purely product and sales perspective, a near perfect fit as the range of products offered by both the retail stores are quite similar.
After Walmart announced a preliminary, non-binding cash offer to the Johannesburg based Massmart in September 2010, the superstore faced fierce opposition from unions and government apprehending that the deal would lead to job cuts, unfavorable conditions of employment and hurt local procurement.
However in May 2011, South Africa’s Competition Tribunal approved the merger subject to Wal-Mart and Massmart agreeing on no job cuts for the first two years following the merger, preferential hiring for the 503 workers laid off in 2010 before the merger was announced, and to create a $14.7 million fund to help local suppliers to develop an competitive edge at the global scale.
Walmart readily agreed to the “less stringent” conditions laid by the Competition Tribunal and promised to open new stores, create thousands of and expressed its ambition to grow its food business by over 50 percent in five years. The company also disclosed tempting plans of carrying out a “substantial” program to train and develop thousands of local farmers, bringing into light its corporate social responsibility with black economic empowerment.
Source : Zacks
