Walmart plans to reinvigorate business in South Africa by purchasing all shares of Massmart

The Walmart corporation, owner of the world’s largest chain of stores, has already possessed a controlling stake in Massmart, and the company eventually plans to purchase the rest of its shares for 62 rand ($3.65) per a share, which is more than the closing price by 50%, with a subsequent removing of the company from the Johannesburg exchange. Walmart also intends Jonathan Molapo, the COO of Massmart since the beginning of this year, to be moved to the CEO position, replacing Mitchell Slape.

The world’s largest retailer is strengthening its positions in South Africa due to Amazon’s plans to enter the country’s market. Walmart hopes to reduce costs by making Massmart a private company. Turning it private will also provide Walmart with the possibility of investing with no scrutiny associated with public companies. 

On Monday, a net loss of Massmart was reported to be of more than a billion rand for the first half of the year. It has increased in comparison with the previous year’s results. According to Bloomberg, the entity has a debt of almost 15 billion rand as well.

Concerning the plans of Walmart, Mitchell Slape mentioned them at a briefing on Monday. He said that Amazon was definitely going to increase the competition in the market, although Walmart had worked hard and developed their e-commerce segment, which might help the company to make rather competitive offers to its customers in the nearest future. 

Slape, a Walmart old hand with 27 years of work in the company, has been commissioned to Johannesburg to slow down a decline the company started to experience in the region. According to Alec Abraham, an expert in analytics, Slape managed to make headway in the chosen direction. Under his guidance, a certain level of business sustainability was reached, which was achieved by reduction of work places, shutting down the Dion Wired and another unprofitable chain store, and stopping selling fresh food in the Game chain stores. Abraham has also noted the company’s online strategy, calling it vitally important.

The assignment of Jonathan Molapo to the post of COO was called one of the steps of a thoroughly planned strategy of succession, said Massmart Chairman Kuseni Dlamini.

Molapo is experiences in taking executive positions in various companies in South Africa and other countries, and he has recently worked as the CEO at Astron Energy Ltd. His most relevant retail experience comes from his work on developing retail at gas stations.

Wallmart has been controlling Massmart to some extent since 2011, when the company took some development responsibilities as a result of buying a majority stake and close attention from the regulatory authorities. Walmart’s new offer wouldn’t be subjected to scrutiny though, as said by Slape.