Bloomberg News

Wal-Mart Says M&A Strategy Will Focus on Existing Markets

October 12, 2011

(Updates with chief financial officer’s comments on sales in 13th paragraph.)

Oct. 12 (Bloomberg) -- Wal-Mart Stores Inc., the world’s largest retailer, will now focus its mergers and acquisition strategy on existing markets, said Doug McMillon, chief executive officer of Wal-Mart’s international unit.

Wal-Mart will look first to countries where it already operates stores rather than enter new regions, McMillon said today at an investor conference in Bentonville, Arkansas. McMillon declined to disclose specific targets. The company is integrating acquisitions made in the U.K., China and Africa.

“First and foremost we want to build scale in the markets where we are,” McMillon said at the meeting. “We like the markets that we are in and will continue to prioritize those. There are a few remaining high-growth markets we are not in, and we won’t miss an opportunity there if one presents itself.”

Japan is the most likely area for mergers and acquisitions in existing markets, said Craig Johnson, president at consulting firm Customer Growth Partners. U.K. retailer Tesco Plc said in August it would exit Japan and sell its 129 locations. Wal-Mart also may look to acquire properties from Japanese retailers such as Aeon Co., Johnson said.

“Given the Japanese economy is still in the ditch, they could acquire good property at a favorable price,” he said.

Wal-Mart told investors in June that it was considering making acquisitions in Japan.

Wal-Mart may consider acquiring U.S. drugstore chain Rite Aid Corp., Natalie Berg, an analyst at U.K. research firm Planet Retail, said in an e-mail.

Carrefour Bid

The retailer is exploring a bid for Carrefour SA’s Brazilian stores to help bolster its scale in Latin America, several people with knowledge of the process said in August.

Interest ramped up after Carrefour abandoned a proposed plan to combine its business with Cia. Brasileira de Distribuicao Grupo Pao de Acucar, one of the people said. The unit may be worth 7 billion euros ($9.7 billion) according to Niamh McSherry, an analyst at Berenberg Bank in London.

“They are looking in current markets for acquisitions, but I guarantee they would do a deal in new markets if it appeared,” David Strasser, an analyst at Janney Montgomery Scott, said in an e-mail. He recommends buying the shares.

In December, Wal-Mart said it would close its Moscow office after attempts to find an acquisition in Russia were thwarted. McMillon said at the time that the company would continue to look at opportunities there.

Entered Africa

Earlier this year Wal-Mart entered Africa by acquiring a controlling stake in South African shop operator and wholesaler Massmart Holdings Ltd. for 16.5 billion rand ($2.1 billion).

Wal-Mart operates in 28 countries, and the international division generated about $109 billion in sales last year. The shares rose 0.9 percent to $55.20 at 4:15 p.m. in New York.

Wal-Mart also said same-store sales in its U.S. division have increased for the past three months as gas prices declined and about 10,000 products were added back to shelves. The retailer didn’t say whether total U.S. same-store sales for the third quarter, which includes October, would increase. In August, Wal-Mart projected U.S. comparable sales in the quarter would range between a 1 percent decline and a 1 percent gain.

“We have new momentum in the U.S.,” Chief Financial Officer Charles Holley said at the meeting.

The company plans to release third-quarter financial results on Nov. 15.

--Editors: Kevin Orland, Robin Ajello

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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