finally we have some news on the WalMart partial offer to acquire a majority stake in Massmart

OK, finally we have some news on the WalMart partial offer to acquire a majority stake in Massmart. WalMart want 51 percent of Massmart. I get the sense that the release says that, they probably want more, but all the "stakeholders" if not all the shareholders would have had other ideas. Government, labour, those sorts of folks, perhaps this is a middle of the road agreement that everyone is happy with. Check out the official announcement ---> Joint announcement of a firm intention by WalMart to make an offer to acquire 51% of Massmart.



The important points:

"The boards of directors of Massmart and Walmart are pleased to announce the terms of a recommended cash offer to be made by Walmart to acquire:




51% of Massmart ordinary shares, equivalent to 51 out of every 100 Massmart ordinary shares held"

"Under the terms of the Offer, Massmart shareholders will receive R148.00 in cash per Massmart ordinary

share sold to Walmart"

"Massmart, following the implementation of the Offer, will remain listed on the JSE" and this is quite interesting, the independent financial advisor, Morgan Stanley "has indicated that in its view the Offer is fair from a financial point of view." Some would argue that it is rich.




So far, institutional shareholders of over 35 percent have given irrevocable to vote in favour or to recommend to their clients and they have non-binding support from 15 percent. Which is different from actually giving up 51 percent of your shares at that price, support of the scheme is one thing, tendering your shares for sale is another thing. Although you would presume that voting in favour or supporting means you will sell.



What I am struggling to come to grips with though is two things specifically, firstly based on this line: "The Offer has the dual benefit of allowing Massmart shareholders the opportunity to realise an attractive premium on part of their investment at R148.00 per Massmart ordinary share in cash while affording them the opportunity to participate in the future value of the Massmart ordinary shares that remain listed on the JSE." What is the price going to trade at post the scheme?


And if the scheme vote FAILS (they need 75 percent agreement), it seems that WalMart could turn to plan B. And plan B suggests that they would ask the folks who agreed to sell all their shares. But not necessarily get them all away. Check this paragraph out:



"If the Substitute Offer is made, all holders of Massmart ordinary shares will be able to tender all or any lesser number of their Massmart ordinary shares, but Walmart will only be obliged to accept tenders that will cause it to acquire 51% of the issued ordinary share capital of Massmart after the implementation of the Substitute Offer.

Any Massmart ordinary shares tendered by holders of Massmart ordinary shares not accepted by Walmart will be returned to the relevant holders of the Massmart ordinary shares following the record date of the Substitute Offer. The shares tendered will be accepted on a pro rata basis and all holders will be treated equally."




It is not clear and early market movements inside of the first half an hour tell you that market participants are a little confused, less than one percent of the normal traded volumes overall. We think that the smart folks who designed the scheme, designed it so that it could not fail, WalMart from a current shareholders point of view, bearing in mind that almost 51 percent of folks have said yes. The "stakeholders" might have other ideas, the competitions authorities still has to give this the thumbs up. Appease minister Patel and the likes with a public hearing, in which I hope somebody makes that Charlie Munger point in which he said low cost retailers do more for society than charity.