Shares of Walmart Inc. (NYSE:WMT) dropped around 0.48% to trade at $130.97 in pre trading session as Massmart Holdings Limited (JSE:MSM) declared on Monday that it has signed a principle contract with Walmart Inc. on the terms of a prospective acquisition proposal by Walmart (WMT), as even now owns a 51% stake in the group.
The proposal, which values Massmart at 1.34 billion rand ($79.4 million), is predicated on a prospective offer of ZAR62 for each share in the firm, according to the South African retail and wholesale conglomerate. According to the statement, the share price offer offers a premium of 53% over the company’s closing share price.
The company said, “The Massmart independent board… 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.”
U.S retail giant, Walmart Inc. has revealed a $377.6 million offer for the 47% of Massmart shares it does not already owns, a deal Massmart assumed would support the overhaul of the loss-making South African retailer.
Shares of Massmart surged over 46% after reveal the deal with Walmart. The store would be taken off the Johannesburg Stock Exchange if shareholders agreed to it. Walmart has offered 62 rand for each outstanding Massmart share, a premium of 53% over the stock’s Friday closing price, according to Massmart.
The American retailer has had to offer growing amounts of financial and operational assistance to all of Massmart’s companies since obtaining majority ownership of the company in 2010.
Massmart’s management released a turnaround plan in 2019 that involved selling off non-core assets, removing fresh food from its Game stores and cutting costs across the group. Massmart said, but issues like the COVID-19 pandemic and the civil unrest in 2021 had held up the turnaround plan.
It added, “The potential offer, if finalised, will provide Massmart with needed access to ongoing financial and operational support from Walmart to sustain the group’s turnaround.”
An independent expert’s preliminary analysis shows that the terms and circumstances of the offer are fair and acceptable, Massmart Chairman Kuseni Dlamini told reporters in a teleconference. The company reported a headline loss of 903.5 million rand ($53.2 million) in the 26 weeks that ended on June 26 compared to a loss of 358.5 million rand the year prior.