At R148 per share the American super-retailer Walmart is to make its most expensive international acquisition to date. It’s target, Massmart has enjoyed a rising share price due to speculation surrounding the deal leading many local analysts to comment that Massmart’s current share price is largely inflated and should ideally be sitting somewhere near R112.

This coupled with the recently strengthened Rand/Dollar exchange as well as the short term negative impact that the acquisition will have on Walmart’s return on assets indicates that this acquisition forms a core of Walmarts long-term growth strategy.

With the Rand/Dollar exchange at a perceived cyclical low point, one wonders why Walmart have not delayed the acquisition to cater for a strengthening dollar in the immediate future. However the flip side of this may be; according to a local political analyst, that Walmart perceives a further drop in the dollar’s hold on the Rand and wants to ensure it is able to seal the deal before said weakening takes place. This remains speculation and many say that by the time the deal has passed through all the regulatory measures the Dollar would have strengthened once more.

Whichever way you choose to look at it, the acquisition of Massmart has not been a bargain for Walmart. However with Walmart now having a footprint in the African market and access to 1 Billion African Consumers these initial acquisition speculations will become inconsequential.

All in all one cannot help but feel positive at the renewed interest in the African Market by international companies and the intellectual capital which they will inject into the South African retail sector will do much to strengthen the country’s retail market.

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