South Africa approves Wal-Mart deal with conditions
South Africa approved Wal-Mart's (WMT-N) $2.4 billion US bid for local retailer Massmart with minimal conditions on Tuesday, giving the world's top retailer a big boost in its plan to expand in fast-growing Africa.
South Africa's Competition Tribunal told Wal-Mart not to cut jobs for two years and work to develop local suppliers.
The decision will be seen as a major advance for the world's largest retailer, which had said it could walk away from the deal if targets were put on local procurement.
"This is good news. It included concessions put forward by both parties so it's a victory all round," said Paul Theron, CEO of Johannesburg-based asset manager Vestact.
"It shows that South Africa is open for business, that large corporates are potential players for outside investment."
The decision could upset South Africa's influential labour unions, some of whom have threatened the "mother of all boycotts" if the deal was approved.
The deal was a test case for major foreign investment in South Africa which has the continent's deepest capital markets but where unions wield enormous political influence.
Massmart must "give preference" to reemploying 500 workers fired in 2010, and set up a 100 million rand ($15 million) fund to help develop local suppliers, the tribunal said.
The two companies said in a joint statement they were "pleased" with the decision and expected Massmart's food business to grow by 50 percent over the next five years.
A spokesman for Massmart said the companies would be holding a conference call later in the day.
"This a meek and mild ruling," said Syd Vianello, a retail analyst at Nedgroup Securities.
"I think all the fears of onerous conditions have been removed. This is a very manageble ruling."
Three government departments and the unions had lined up against the deal, asking the tribunal to impose targets on local procurement and a freeze on job cuts.
The government and unions are concerned about Wal-Mart's global supply network which, they have said, could lead to a flood of cheap imports, sparking job losses and squeezing local companies.