JOHANNESBURG -(Dow Jones)- Shareholders in South Massmart Holdings Ltd. (MSM.JO) have Monday agreed to sell a controlling stake in the African retailer to Wal-Mart Stores Inc. (WMT) for $2.39 billion.
The proposed acquisition marks the Bentonville, Ark.-based retail giant first foray into the growing sub-Saharan African market. However, the deal faces opposition from labor unions concerned at what the possible "Walmartization" of the local retail industry.
Shareholders voted almost 98% in favor of a deal to sell a 51% stake in Massmart to Wal-Mart at 148 rand ($21.36) a share, the company said. The transaction needed the support of at least 75% of Massmart shareholders.
"This is an important milestone and we now await the decision from the competition authorities," said Grant Pattison, chief executive of Massmart, adding the Competition Commission is expected to make its recommendation this month, followed by a Competition Tribunal hearing.
Massmart operates several wholesale and retail chains, including Game general-merchandise stores, Builders Warehouse for construction and Makro warehouse-club stores. The bulk of the company's 288 stores are in South Africa, although Massmart also operates in 13 other sub-Saharan countries.
The South African Commercial, Catering and Allied Workers Union, which held a press conference outside the venue where Massmart shareholders voted, said it will challenge the planned takeover through competition law and "in the political realm." It said it would also "directly educate" its membership about the implications for workers, accusing Wal-Mart of being anti-union.
"Despite the advent of democracy in 1994, South Africa remains one of the most inequitable societies in the world, said Tyotyo James, deputy-president of Cosatu. "The acquisition of 51% of Massmart by Walmart will cut out even more local ownership of one of the major retail players in the country."
Massmart said it and Wal-Mart have provided labor unions with numerous assurances the companies will continue to honor all existing union agreements and South African labor law if the deal goes ahead. It said Saccawu represents 41% of its employees.
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