Walmart considers total takeover of Game and Makro owner

Massmart has reached a principle agreement with majority shareholder Walmart that could potentially see the US-based multinational corporation acquire all of the company’s remaining shares.

The deal is worth R6.4 billion, outgoing Massmart CEO Mitch Slape said.

In a notification to Massmart shareholders on Monday, 29 August 2022, Massmart laid out the salient terms of the potential offer.

A scheme to be proposed by the company’s board between Massmart and shareholders will see Walmart acquire all of the remaining ordinary shares.

Those holding Massmart shares outside of Walmart would receive a cash payout of R62 per share if the transaction were to proceed in its current form.

“This represents a premium of 53% to the closing share price, a 68.7% premium to the 30-day volume weighted average price and a 62.4% premium to the 90-day volume weighted average price as at 26 August 2022,” Massmart said.

“In the event that the scheme does not become operative for whatever reason, a standby conditional general offer — which would run concurrently with the scheme — would be implemented for the same consideration.”

The 2013 Massmart employee share plan would also be restructured.

Massmart said the transaction would result in delisting the company’s shares from the JSE.

The Massmart board appointed an independent panel to review the terms and conditions of the potential offer.

PricewaterhouseCoopers has been brought on as an independent expert to consider whether the potential offer was fair and reasonable to Massmart shareholders.

“The independent expert has considered the Potential Offer and issued a preliminary report that the terms and conditions are fair and reasonable,” Massmart said.

“The Massmart independent board, taking into account the preliminary report of the Independent Expert, is unanimously of the preliminary view that the terms and conditions of the potential offer are fair and reasonable and intends to recommend to the Massmart Board to propose the scheme and support the standby general offer,” it added.

Massmart stressed that the announcement does not constitute a firm intention to make an offer in terms of the Companies Regulations, 2011 and Companies Act No. 71 of 2008 (“Firm Offer”).

The transaction would be subject to regulatory approvals from the Takeover Regulation Panel, the South African Reserve Bank, and the JSE, among others.

“The making of a firm offer is subject to the execution of the transaction documentation, final approvals by the Massmart Board and Walmart and the approval of the firm offer by the TRP.”

Walmart giving “overweight” support to Massmart

Walmart first took control of Massmart in 2010, acquiring 51% of the South African retailing giant’s shares. At the time, it paid R148 per Massmart ordinary share at a 19.2% premium to the 30-day weighted average.

Massmart explained that its complete acquisition by Walmart would allow the US company to continue its “overweight” support as a long-term shareholder.

Massmart said its latest interim results, also released on Monday, revealed “ongoing underperformance” and significant headwinds faced by the group’s operating businesses.

“Walmart has had to provide increasing levels of support across Massmart’s businesses,” the company stated. “This support has deepened substantially in the period since the outbreak of Covid-19 in 2020.”

Walmart injected R4 billion into Massmart during this period to shore up the group’s liquidity.

Walmart and Massmart have already begun discussions with shareholders about the potential offer.

“To date, support has been received with respect to approximately 11.3% of the ordinary shares representing approximately 24.6% of the outstanding ordinary shares,” Massmart stated.

“Given the significant churn in Massmart’s shareholder register, Massmart shareholders with whom Walmart and Massmart have been unable to engage with to date, will now have the opportunity to consider the potential offer.”

It added that although discussions between Walmart and Massmart were at an “advanced” stage, there was no certainty that a firm offer would ultimately be made.

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Walmart considers total takeover of Game and Makro owner