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Massmart – Walmart Approach Formalised As Massmart Receives Firm Offer For Controlling Interest

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The Board of Directors of Massmart has received written notice from Walmart of its firm intention to make an all cash offer to acquire 51% of Massmart at a cash price of R148.00 per Massmart ordinary share by way of a scheme of arrangement. Offers on comparable terms are being extended to the beneficiaries of the Employee Share Trust, the Thuthukani Trust and the Black Scarce Skills Trust. These offers will be inter-conditional with the offer to ordinary shareholders.

The cash offer provides an opportunity for Massmart shareholders to realise a significant premium (19.2% to the 30 day volume weighted average price on 23 September 2010, the last trading day prior to the first Cautionary Announcement) and retain further upside potential as a consequence of Walmart’s entry and the continued listing of Massmart on the JSE.

The Massmart Board has considered the terms of the offer and the opinion of Morgan Stanley, the independent advisor and is unanimous in its support for the proposed transaction. The total transaction is valued at approximately R 17 billion for 51% of Massmart.

Walmart’s offer follows the completion of a thorough and rigorous due diligence process. There are still a number of important conditions that need to be fulfilled before the transaction can be implemented. These include amongst others majority (75%) shareholder support as well as approval from the South African Competition authorities.

Commenting on the offer, Massmart CEO Grant Pattison, said: “This is a milestone in Massmart’s history and is a vote of confidence not only in Massmart and our employees, but also in the strong growth potential of South Africa and the continent. If approved, the transaction promises to be very positive for the regional economy, facilitating job creation, providing new opportunities for small and medium businesses and improving competitiveness.

“In gaining access to Walmart’s experience and capabilities, we expect to be able to offer consumers an even wider selection of products that are competitively priced and more consistently available, delivering an improved customer experience across all our stores.

“We reaffirm Walmart’s commitment to honour existing union agreements and to maintain our Broad-Based Black Economic Empowerment credentials, working diligently with all parties to grow skills, create jobs in the retail industry, advance transformation and further socio-economic development initiatives,” he said.

Walmart’s offer for 51% of Massmart will ensure that the latter remains listed on the JSE, enabling shareholders to continue to participate in future growth.

Subject to the fulfilment or waiver of the conditions precedent, the offer, as it applies to Massmart ordinary shareholders, is to be implemented by way of a scheme between Massmart and the holders of qualifying Massmart ordinary shares.

Once the scheme is operative, Massmart ordinary shareholders will be deemed to have disposed of their scheme shares, representing 51% of their total shareholding. They will retain the remaining 49% of their shareholding for as long as they choose to do so. The same dispensation is made to beneficiaries of the trusts.

Walmart’s interest in acquiring a share of Massmart was announced to the market on 27 September 2010.

Commenting on the offer, Massmart Chairman and founder Mark Lamberti said: “Walmart’s offer is an affirmation of Massmart’s strategic and operating progress in pursuit of mass market retail excellence in South Africa and the sub continent over many years. The offer is very fair to existing shareholders who can both realise some value and obtain the opportunity to co-invest with Walmart. We are confident that the proposed transaction will enhance the Group’s prospects and growth, with obvious benefits to current and prospective stakeholders. Together these factors made it easy for the Board to make a unanimous recommendation of the offer to shareholders.”

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