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Category 2 Disposal Announcement
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/014066/06)
JSE Share Code: MSM
ISIN: ZAE000152617
('Massmart Holdings" or "Company" or "Group")
CATEGORY 2 DISPOSAL ANNOUNCEMENT
1. INTRODUCTION
Shareholders of the Company ("Shareholders") are referred to the Operational
update and trading statement released on SENS on 19 February 2021 and the Group
results for the financial year ended 27 December 2020 released on SENS on 8 March
2021("Results Release"). As part of the Results Release, the Company advised
that a strategic decision has been taken by the Group to reduce exposure to
certain non-core assets, which included the disposal of the Cambridge Food, Rhino
and Massfresh assets, as well as selected Masscash Cash and Carry assets.
Shareholders are advised that on 20 August 2021 ("Signature Date"), a sale of
business agreement was entered into between the Company, through its wholly-
owned subsidiaries Massmart Wholesale Proprietary Limited ("Massmart
Wholesale"), Massmart Retail Proprietary Limited ("Massmart Retail"), Cambridge
Food Gauteng Proprietary Limited ("Cambridge Food Gauteng"), Fresh Food Direct
Proprietary Limited ("Fresh Food"), Clidet No 1003 Proprietary Limited ("Clidet")
and DD's Cash and Carry Proprietary Limited ("DD's Cash and Carry")
(collectively, "Sellers"), K2019389785 (South Africa) Proprietary Limited
("Purchaser"), a subsidiary of Shoprite Checkers Proprietary Limited ("Shoprite
Checkers") ("Agreement"), in terms of which the Company will, through the
Sellers, sell, as a going concern, their respective businesses comprising of –
i. the Cambridge Food business and Rhino Cash and Carry business
(collectively, ("Cambridge Food Business");
ii. the Fruitspot business and Massfresh Meat business (collectively,
"Massfresh Business"); and
iii. 12 Masscash Cash and Carry stores (collectively, "Selected Masscash Cash
and Carry Assets"),
(collectively, "Sale Businesses") to the Purchaser ("Disposal"), for the disposal
consideration set out in paragraph 4 ("Disposal Consideration").
2. DESCRIPTION OF THE SALE BUSINESSES
The Sale Businesses consist of wholesale and retail chains that are all focused
on high-volume and low-cost distribution and are each reliant on high volumes
and operational excellence as the foundation of price leadership, in the
distribution of mainly branded consumer goods for cash.
The Cambridge Food Business is owned by Massmart Retail, Cambridge Food Gauteng,
DD's Cash and Carry and Clidet, in their respective proportions and consists
of (i) Cambridge Food and (ii) Rhino Cash and Carry of which 56 (fifty-six)
stores will form part of the Disposal. The Cambridge Food Business is a chain of
food supermarkets in major urban and regional areas in South Africa supplying
appropriate ranges of quality food and liquor products.
The Massfresh Business is owned by Fresh Food and consists of –
i. The Fruitspot, being a wholesale and distributor of fresh fruit and
vegetables with 3 (three) stores located in Johannesburg, Cape Town and
Durban; and
ii. Massfresh Meats, being a processor and distributor of meat and meat
products with a meat processing facility located in Benoni.
The Selected Masscash Cash and Carry Assets consist of Browns & Weirs Cash &
Carry – Idutywa, Browns & Weirs Cash & Carry - King Williams Town, Browns & Weirs
Cash & Carry – Mount Frere, Ficksburg Cash & Carry, Nelspruit Cash & Carry, Piet
Retief Liquors, Pretoria West Cash and Carry, Springs Cash & Carry, Thembani
Wholesalers Pty Ltd, Vryburg Cash & Carry, Jumbo Cash & Carry – Durban and Qwa
Qwa Liquors.
3. RATIONALE FOR THE DISPOSAL
In our journey to becoming the healthiest and strongest retailer in Africa with
the best long-term prospects we announced at our annual results presentation on
8 March 2021, three key initiatives:
• Stabilise through the strong execution of our turnaround plan; –
• Focus through divestiture of non-core assets to drive sustainable,
profitable growth; and
• Invest through accelerated growth in eCommerce, key categories and
geographies.
Pursuant to the review of our portfolio (which remains ongoing), management has
determined that the Sale Businesses are non-core to the ongoing operations of
the Group. The Disposal adds a cash injection into the Group and frees up
managements time to focus on the creation of shareholder value through the Invest
initiative. The Disposal will also be effected in a responsible manner so as to
preserve jobs via S197 of the Labour Relations Act No 66 of 1995. The Disposal
is a key milestone in the Focus initiative as outlined above.
We continue to deliver on all three initiatives and will provide a further update
at our results presentation on 27 August 2021.
4. DISPOSAL CONSIDERATION
The maximum Disposal Consideration in respect of the Sale Businesses is R1.36
billion, payable in cash as soon as the Agreement becomes unconditional. The
Disposal Consideration is subject to adjustment based on the assets held by the
Sale Businesses at the targeted effective date of the Disposal. It is anticipated
that the transaction will become effective in early 2022 once all the conditions
precedent as outlined in paragraph 6 below have been met.
5. USE OF THE PROCEEDS
The cash proceeds will be used to pay down drawn bank facilities.
6. CONDITIONS PRECEDENT
The Agreement (and thereby, the Disposal) remains subject to the fulfilment or
waiver (to the extent permissible) of the following conditions precedent
contained in the Agreement:
i. the conclusion of written lease agreements in relation to the relevant
immovable properties used in connection with the Sale Businesses and such
lease agreements having become unconditional;
ii. the assignment of lease agreements or new lease agreements being entered
into as required by the Agreement;
iii. the approval of relevant competition authorities in relation to the
Disposal having been obtained;
iv. the Purchaser having delivered a duly executed undertaking letter by
Shoprite Checkers to the representatives of the Sellers guaranteeing the
obligations of the Purchaser under the Agreement;
v. the representatives of the Sellers having delivered a duly executed
undertaking letter by the Company to the Purchaser guaranteeing the
obligations of the Sellers under the Agreement; and
vi. the relevant Sellers being in possession of certain agreed licenses.
7. FINANCIAL INFORMATION
Set out below is the financial information of the Sale Businesses that has been
extracted from the Group’s audited results for the 52 weeks ended 27 December
2020 which were prepared in terms of IFRS. The financial information is the
responsibility of the board and has not been reviewed or reported on by the
Group’s external auditors.
Trading
Profit/(Loss)
Net Asset Value Sales (Excluding
(Before Interest
Rm (Excluding Intercompany
and Tax but
Intercompany Balances) Sales)
including Corporate
Allocations)
Cambridge and Rhino 988.4 8,266.5 (363.5)
Massfresh 229.4 650.5 (136.0)
Certain Cash & Carry
stores 116.0 1,910.6 12.9
8. CLASSIFICATION OF THE DISPOSAL
The Disposal is classified a category 2 transaction as contemplated in the JSE
Listings Requirements, as such, no approval from Shareholders is required.
20 August 2021
Financial advisor in relation to Cambridge Food, Rhino and Massfresh: Barclays
Bank PLC, acting through its Investment Bank
Financial advisor in relation to Masscash Cash and Carry stores: The Standard
Bank of South Africa Limited
Legal advisor in relation to Cambridge Food, Rhino and Massfresh: Edward Nathan
Sonnenbergs Incorporated
Legal advisor in relation to Masscash Cash and Carry stores: CMS RM Partners
Inc. and Edward Nathan Sonnenbergs Incorporated
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
Date: 20-08-2021 03:30:00
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