Walmart's €1.7bn takeover of South African chain approved

US RETAIL giant Walmart has been given the go-ahead by South Africa’s competition tribunal to buy a controlling stake in local retailer Massmart, despite strenuous objections from unions, small businesses and government departments.

The tribunal’s decision to approve Walmart’s €1.7 billion bid for Massmart, which owns 288 stories in South Africa in addition to retail outlets in up to a dozen other African countries, gives the world’s largest retailer its first foothold on the continent.

“Walmart does not compete with Massmart in South Africa and its only presence in the country is a small procurement arm that sources local products for its stores globally. The merging parties contend that the merger will indeed be good for competition by bringing lower prices and additional choice to South African consumers,” the tribunal said.

The deal sees Walmart take a 51 per cent stake in Massmart’s stable of discount stores at 148 rand (€15.08) per share. Massmart’s branch network sells a wide range of household items.

Walmart first tried to buy 100 per cent of Massmart last September, but met fierce opposition from South Africa’s main union federation, Cosatu, and three government departments, which referred the bid to the tribunal.

After threatening to pull out of the deal, Walmart came back with a second offer earlier this year. This offer included conditions it hoped would ease opposition to its bid. The US retailer promised it would establish a R100 million supplier development fund; there would be no merger-related retrenchments for two years; and it would recognise local unions for three years in the wake of the merger.

South African trade unions remain opposed to the deal and they condemned the tribunal’s decision, saying it was likely to drive down wages and open the way for cheap imports. They said these would harm local retailers and lead to job losses.

Cosatu, which is in an alliance with the ruling African National Congress, has warned that demonstrations, strike action and “the mother of all boycotts” of Massmart stores could be on the cards as a response to the deal.

“The approval does nothing to address the fundamental concerns raised by Cosatu, the South African government and numerous other concerned South Africans,” Cosatu spokesman Patrick Craven said in a statement.

He said the approval with conditions smacked “of a public relations exercise to divert attention from [Walmart’s] track record of procuring goods from wherever in the world they are cheapest, regardless of the conditions of the workers producing these goods”.

Massmart chief executive Grant Pattison said the group’s management team welcomed the prospect of becoming part of the Walmart family.

The Walmart-Massmart group plans to expand the number of stores it has in South Africa over the next five years.