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Wal-Mart proposes buying Massmart Holdings for $4.26 billion

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NEW YORK — Wal-Mart Stores Inc., the world’s No. 1 retailer, proposed Monday to buy Massmart Holdings Ltd. for $4.26 billion in what would be its biggest deal in more than 10 years as it seeks entry into the rapidly growing African market.

Massmart operates 290 stores in 13 African countries, most of them in South Africa.

Wal-Mart has become increasingly reliant on growth from its international markets, about a quarter of its sales, as growth in the U.S. has slowed. Wal-Mart has bought stakes in local operators in markets from Chile to China to help it penetrate the overseas markets. Its key international unit, Asda in Britain, came from a $10-billion-plus purchase in 1999.

Wal-Mart International operates in 14 countries and Puerto Rico.

“Wal-Mart’s proposed acquisition reaffirms the company’s growth and emerging market aspirations,” said Sanford C. Bernstein & Co. analyst Colin McGranahan. “However, we believe that investors may have reservations about the company’s decision to pursue acquisitions in a new part of the world.”

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Acquiring Massmart would be “a compelling growth opportunity” and would “provide a platform for growth and expansion in other African countries,” said Andy Bond, former chief of Asda and currently an executive vice president with responsibility for the company’s operations in the region including Britain and Africa.

Massmart said the proposal was “the beginning of the process and it is difficult to say how long it will take or whether it will lead to an offer.”

Massmart Chief Executive Grant Pattison said Wal-Mart’s interest “represents a vote of confidence” in South Africa, the firm and its employees.

Doug McMillon, head of Wal-Mart International, said the purchase “fits with our focus on large, high-growth markets.” The deal would help improve returns at Wal-Mart’s international business, he said.

Daniel and Cheng write for MarketWatch.com/McClatchy.

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