Massmart offloads ‘non-core’ stores and brands to Shoprite for R1.36 billion

Makro and Game owner Massmart has announced the sale of several non-core businesses to the Shoprite Group for R1.36 billion.

The sale will see Shoprite take ownership of Cambridge Food, Rhino, Massfresh and 12 Cash & Carry stores. The sale is still subject to regulatory approval, which Massmart hopes will be concluded in the first quarter of 2022.

Massmart said that it will use the sale proceeds to pay down drawn bank facilities and invest in e-commerce. It will also pump money into merchandise areas where the remaining Massmart brands are the market leaders.

This includes general merchandise (Makro), DIY (Builders) and wholesale food and liquor.

“The sale marks another step in the group’s portfolio optimisation process and will, amongst other benefits, free-up management time to enable increased focus on leveraging Massmart’s core merchandise and market strengths,” said Massmart Group CEO Mitch Slape.

Under the terms of the deal, the group said that staff affected by the sale will continue to be employed by Shoprite on terms and conditions that are “on the whole, not less favourable than their existing employment contracts”.

“We are of the opinion that these are sound businesses with good long-term prospects. They are being sold as going concerns and, in the hands of a well-established and efficient fresh food and grocery retailer, will reach their full potential, thereby saving jobs and protecting livelihoods,” Slape said.

In a trading statement last week (13 August), Massmart pointed to its business in South Africa being negatively impacted by declining consumer confidence due to the Covid-19 pandemic and lockdowns.

For the 26-week period ended 27 June 2021, Massmart’s total sales amounted to R41.3 billion, representing an increase of 4.4% on the same period last year, with comparable-store sales increasing by 4.8%.

Total sales from South African stores for the 26-week period increased by 5.9%, while comparable stores sales increased by 6.6%.

Massmart expects that headline earnings per share on a continuing basis – which excludes the Cambridge, Rhino, and Massfresh businesses as discontinued operations – will improve by 51.6% to 61.6%, to a loss of 146.8 cents per share and 185 cents per share.

In January 2020, Massmart announced a portfolio optimisation initiative as one of six workstreams in the group’s turnaround plan. This has informed the closure of DionWired stores and the decision to divest several underperforming stores.

Read: Massmart says foot traffic remains constrained with the impact of Covid denting consumer confidence

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Massmart offloads ‘non-core’ stores and brands to Shoprite for R1.36 billion