Walmart owned African subsidiary, Massmart has begun consultations about closing its Game stores in East and West Africa, after efforts to find buyers failed.
Massmart Holdings said that it had begun staff consultations about closing its Game stores in East and West Africa, after efforts to find domestic buyers for the stores failed.
Group CEO Mitch Slape
Group CEO Mitch Slape said last year that it was in discussions to sell all its Game stores in Ghana, Nigeria, Uganda, Kenya and Tanzania to stem losses in that struggling part of its business.
“Massmart initiated a process over a 12-month period to investigate … the opportunity to sell our East and West African stores to local investors. Unfortunately, this initiative did not deliver a meaningful outcome,” the company said in a statement.
Massmart has been posting losses and losing market share to bigger local rivals in South Africa, forcing majority owner Walmart to cut costs and invest more capital to turn the company around.
The US retail giant has signed a deal to begin buying the 47% stake in Massmart it did not already own.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Walmart, a major US retailer, has submitted a bid to acquire the remaining capital balance of South African retailer Massmart for 6.4 billion rand ($377.6 million).
Walmart offered 62 rand per share in circulation to purchase shares of 47% of the capital of the firm, which is known for owning the brands Makro, Game, and Builders Warehouse, according to a press statement issued by Massmart on Monday, August 29.
Massmart Chairman of the Board Kuseni Dlamini
When compared to the closing price of the Massmart share on Friday, August 26, at the Johannesburg Stock Exchange, this price indicates a 53% premium.
Massmart Chairman of the Board Kuseni Dlamini informed the media in a statement that “the terms and conditions of the offer are fair and reasonable” according to a preliminary evaluation by an independent expert.
The tender offer should help Massmart’s restructuring plan if shareholders accept it.
The Implications Of The Takeover By Walmart
Massmart has been racking up losses for a number of years as a result of the fierce competition in the South African market. Its net losses increased in the first half of 2022 from 358.5 million rand in the corresponding period of 2021 to 903.5 million rand ($53 million).
In 2011, Walmart paid R17 billion ($2.4 billion) to purchase a 51 percent share in Massmart Holdings. According to Bloomberg, Massmart had to liquidate a number of outlets and its stock price has fallen 21% since the end of 2019.
According to Walmart, it has had to “give growing degrees of financial and operational assistance” to Massmart since acquiring ownership of the South African retail conglomerate in 2010.
The restructuring plan for Massmart, which was introduced in 2019, featured cost reductions across all of the group’s brands as well as the sale of non-essential assets and the removal of fresh food from Game shops. However, obstacles like COVID-19 and the societal instability noted in 2021 have slowed down the execution of this strategy.
“These factors have exacerbated liquidity risk at Massmart, which Walmart’s financial support has helped to mitigate. This support includes a R4 billion loan provided by Walmart to Massmart at the height of the Covid-19 lockdown in April 2020, 50% of which was subsequently converted, in December 2021, into equity through a perpetual fixed rate unsecured note,” Walmart noted.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
