The companies said Monday that the U.S.-based retail giant made a nonbinding proposal that could lead to a cash offer of 148 rand ($21.08) a share for Massmart, which operates several chains in the sub-Saharan region. The companies said they are in exclusive negotiations to try to hammer out a deal.
"It is early days," Massmart Chief Executive Grant Pattison said during a conference call. Executives from the companies first met Friday in London and held talks over the weekend, he said.
Massmart, which was founded in 1990 and listed in Johannesburg in 2000, owns chains such as Game, Builders Warehouse and Makro that have stores across South Africa and in 13 other countries in the region. The company had revenue of 47.55 billion rand in the year through June, up 10% from a year earlier.
Andy Bond, vice president for Walmart's operations in the U.K. and Africa, said South Africa offers a growth opportunity for the company and a platform to expand into other African countries. He said the company would continue Massmart's program to support black economic empowerment in South Africa if a deal is completed.
"This potential combination with a market leader will enable us to add value to an already successful business through investments in people and technology," said Doug McMillon, president and CEO of Walmart International.
News of the proposed takeover helped drive Massmart's shares 10% higher in early trading, giving the company a market value of nearly 30 billion rand