Led by Andy Bond, Walmart’s bid to buy South African Massmart has sparked a frenzy of rumour and activity. Adam Leyland and Simon Mathers report
One of the intentions in hosting the World Cup in South Africa was to attract attention to Africa's growing wealth and prospects.
So when Walmart tabled a bid to buy Massmart, a SAR47bn (£4.2bn) retail and wholesale chain, it could hardly have been a surprise (thegrocer.co.uk, 28 September).
Walmart is prepared to pay generously the $4.2bn offer it tabled is about 15 times its latest earnings of SAR2bn to gain a foothold in sub-Saharan Africa, where consumer spending is expected to grow from $860 billion (R6.04 trillion) in 2008 to $1.4 trillion in 2020.
Andy Bond, the former Asda CEO who has spearheaded the bid as part of a new roving part-time brief to examine M&A options for Walmart in Europe, the Middle East and Africa, describes the opportunity as "genuinely interesting".
"The South African economy [has] an emerging consumer [who] we feel will be attracted to our low-price proposition. At the upper end of the market, there are three or four players, so it's familiar. But they are serving quite a small population base, and there's a massive consumer base that's never been properly served by the multiples."
Yet the bid has sparked a frenzy of activity among the unions, with representatives from as far as Mexico and Chile preparing to assist the SA Commercial, Catering and Allied Workers Union (Saccawu) in preparing its case to the Competition Tribunal amid fears over the future prospects for Massmart's 28,000-employee workforce.
Lawyers believe Saccawu could delay a deal beyond the first quarter of 2011. But it's rumours that Walmart is scaling back its stake that have set the most tongues wagging. According to an announcement in October, shareholders most of whom are non-South Africans wanted to retain a stake in the business.
The news fuelled speculation, however, that the appreciating rand had heightened concerns about the perceived premium Walmart is paying linked to the appointment of Charles Holley, in late September, as Walmart Inc's new CFO amid wider concern about Walmart's $5bn commitment to international M&A. In a report, Credit Suisse noted that Walmart's non-US operations generated "significantly lower returns", and recommended Walmart return more capital to shareholders through share repurchases and dividends instead.
Bond dismisses the rumours. "When we first sat down with Massmart, the intent was to acquire up to 100% of the business, but we were genuinely flexible. It's very important we have a controlling interest, but as previous acquisitions, such as Mexico, have shown, Walmart is happy to share in mutually beneficial success."
He also dismisses suggestions that the acquisition might lead to a new full-time executive role for Bond on the Massmart board. Having already taken on a non-executive position at Wiggle, the online cycling retailer "it's perfect for me" says Bond, a bike fanatic he is more likely to follow Allan Leighton than Archie Norman in pursuing a number of roles. "I want to avoid the word plural," he told The Grocer, "as that sounds like I want 10 jobs but to do no actual work.
"The truth is I want a more entrepreneurial lifestyle, to make a few investments and get my sleeves rolled up."
The last six months in which Bond has mentored new Asda CEO Andy Clarke, while completing the acquisition of Netto before moving on to project work for Walmart EMEA, has "not dissuaded" Bond of this intention. "I'm 45, I've 20 years left, and I've made a decision not to go corporate."
Bond is already enjoying his role at Wiggle. "It's a small company, in a sector I like, high growth and extremely successful, but it's also interesting, as a dotcom, in that it's already one of the biggest cycling retailers in the world, and is building a global supply chain and infrastructure that can bring scale to bear. It's music to my ears."
One of the intentions in hosting the World Cup in South Africa was to attract attention to Africa's growing wealth and prospects.
So when Walmart tabled a bid to buy Massmart, a SAR47bn (£4.2bn) retail and wholesale chain, it could hardly have been a surprise (thegrocer.co.uk, 28 September).
Walmart is prepared to pay generously the $4.2bn offer it tabled is about 15 times its latest earnings of SAR2bn to gain a foothold in sub-Saharan Africa, where consumer spending is expected to grow from $860 billion (R6.04 trillion) in 2008 to $1.4 trillion in 2020.
Andy Bond, the former Asda CEO who has spearheaded the bid as part of a new roving part-time brief to examine M&A options for Walmart in Europe, the Middle East and Africa, describes the opportunity as "genuinely interesting".
"The South African economy [has] an emerging consumer [who] we feel will be attracted to our low-price proposition. At the upper end of the market, there are three or four players, so it's familiar. But they are serving quite a small population base, and there's a massive consumer base that's never been properly served by the multiples."
Yet the bid has sparked a frenzy of activity among the unions, with representatives from as far as Mexico and Chile preparing to assist the SA Commercial, Catering and Allied Workers Union (Saccawu) in preparing its case to the Competition Tribunal amid fears over the future prospects for Massmart's 28,000-employee workforce.
Lawyers believe Saccawu could delay a deal beyond the first quarter of 2011. But it's rumours that Walmart is scaling back its stake that have set the most tongues wagging. According to an announcement in October, shareholders most of whom are non-South Africans wanted to retain a stake in the business.
The news fuelled speculation, however, that the appreciating rand had heightened concerns about the perceived premium Walmart is paying linked to the appointment of Charles Holley, in late September, as Walmart Inc's new CFO amid wider concern about Walmart's $5bn commitment to international M&A. In a report, Credit Suisse noted that Walmart's non-US operations generated "significantly lower returns", and recommended Walmart return more capital to shareholders through share repurchases and dividends instead.
Bond dismisses the rumours. "When we first sat down with Massmart, the intent was to acquire up to 100% of the business, but we were genuinely flexible. It's very important we have a controlling interest, but as previous acquisitions, such as Mexico, have shown, Walmart is happy to share in mutually beneficial success."
He also dismisses suggestions that the acquisition might lead to a new full-time executive role for Bond on the Massmart board. Having already taken on a non-executive position at Wiggle, the online cycling retailer "it's perfect for me" says Bond, a bike fanatic he is more likely to follow Allan Leighton than Archie Norman in pursuing a number of roles. "I want to avoid the word plural," he told The Grocer, "as that sounds like I want 10 jobs but to do no actual work.
"The truth is I want a more entrepreneurial lifestyle, to make a few investments and get my sleeves rolled up."
The last six months in which Bond has mentored new Asda CEO Andy Clarke, while completing the acquisition of Netto before moving on to project work for Walmart EMEA, has "not dissuaded" Bond of this intention. "I'm 45, I've 20 years left, and I've made a decision not to go corporate."
Bond is already enjoying his role at Wiggle. "It's a small company, in a sector I like, high growth and extremely successful, but it's also interesting, as a dotcom, in that it's already one of the biggest cycling retailers in the world, and is building a global supply chain and infrastructure that can bring scale to bear. It's music to my ears."
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