20100927 africanews
JOHANNESBURG/LONDON (Reuters) - Wal-Mart is in talks to buy South Africa's Massmart, a $4 billion deal that would give the U.S. retailer a big presence in fast-growing Africa and boost its emerging markets strategy.
The world's largest retailer has been hit by weakness in the United States where low-income shoppers are particularly vulnerable to unemployment and higher gasoline prices. It has responded by focusing on cost cuts and international growth.
Buying Massmart, South Africa's third-largest listed retailer by value, would give Wal-Mart a considerable network in Africa's biggest economy and a foothold in 13 other countries in sub-Saharan Africa.
"Massmart is a very good fit with their business," said Bryan Roberts, global research director at industry research firm Planet Retail in London.
Wal-Mart has made a non-binding proposal of 148 rand per Massmart share, valuing it at around 30 billion rand, a premium of nearly 10 percent over Thursday's close of 134.75 rand.
Massmart said it has granted the U.S. firm an exclusivity period and there is no certainty of a formal offer. But Massmart's share price jumped 11 percent to 150 rand, above the value of the proposed offer.
Wal-Mart's shares fell 0.4 percent to $53.85 and some analysts said the acquisition might not be the best use of Wal-Mart's cash.
"Wal-Mart should be allocating its capital first and foremost to developing U.S. urban stores and then returning cash to shareholders," Wall Street Strategies analyst Brian Sozzi said in a note to clients.
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