Wal-Mart's Africa Ambitions May Spark S. African Takeover Spree

Bidvest Group Ltd. and Northam Platinum Ltd. are among at least 10 South African companies that could be acquisition targets for foreign bidders seeking growth opportunities in the wake of $15 billion worth of deals announced since July by Wal-Mart Stores Inc., HSBC Holdings Plc and Nippon Telegraph & Telephone Corp.

“Wal-Mart’s offer is going to spark other interest,” David Shapiro, head of Sasfin Holdings Ltd.’s securities unit, said in a telephone interview from Johannesburg. “Any deal is possible.”

In the race for Africa, companies from the U.S., China, Japan and the U.K. are scrambling to buy the continent’s best assets, tapping into its growth potential and its 1 billion people in a world where returns from developed nations are faltering. Wal-Mart, the world’s largest retailer, wants to buy South Africa’s Massmart Holdings Ltd. for about $4.6 billion, while HSBC is in talks to buy a controlling stake Nedbank Group Ltd. and Japan’s NTT is buying Africa’s biggest technology company, Dimension Data Plc.

Shapiro’s South African company takeover-shopping list also includes Barloworld Ltd., the world’s largest fork-lift dealer; AECI Ltd., a chemicals company; Aspen Pharmacare Holdings Ltd., the southern hemisphere biggest generics drug-maker; Tiger Brands Ltd., a food distributor, and Blue Label Telecoms Ltd., reports Bloomberg BusinessWeek in its Oct. 4 issue.

Retailers on Radar

Retailers Shoprite Holdings Ltd. and Pick n Pay Stores Ltd. could lure bids from Carrefour SA or Tesco Plc, Stephen Carrott, a Johannesburg-based analyst at Macquarie Group Ltd. said in a note. Shoprite, which has 124 supermarkets outside South Africa and plans to add another 20 in Nigeria over the next two years, is an “excellent” potential acquisition, he said.

“Bidvest is a prime target for African growth,” said Wayne McCurrie, who helps manage more than $17 billion at RMB Asset Management in Johannesburg. Bidvest, which makes 57 percent of its revenue from southern Africa, owns businesses from auto dealerships to financial services.

It’s a “great company with great assets,” said Simon Hudson-Peacock, head of specialist equities at Cape Town-based Cadiz Asset Management. Bidvest’s international food and catering assets could catch the attention of an acquirer like Sysco Corp, he said.

A Chinese company could bid for Northam to secure platinum supplies, Sasfin’s Shapiro said. “Its Booysendal mine is coming online soon and it could be a super asset,” he said, adding China may also buy coal mines in South Africa. Eurasian Natural Resources Corp., a Kazakh metal producer, already owns 12 percent of the company.

‘Exposed to Africa’

Lonmin Plc, in which Xstrata Plc already owns 25 percent, could also be bought, said Hudson-Peacock of Cadiz. Xstrata “may want to capitalize” on gains in Lonmin’s share price since it originally bought the stake by selling the holding to another company.

Barloworld, founded in Durban more than 100 years ago and which sells machinery made by Caterpillar Inc., is “nicely exposed to Africa,” according to McCurrie, who also said South Africa’s largest food company, Tiger Brands, which is turning to making acquisitions outside its home market after failing to last year buy its largest rival AVI Ltd., is a “good play” for companies with the view that people spend more on food as nations get richer.

Smaller South African companies, such as Business Connexion Ltd., the computer-services company which had a take-over approach from Telkom South Africa Ltd. blocked by regulators, may also be an attractive asset to a company like International Business Machines Corp., Hudson-Peacock said. Business Connexion said in a statement today that it’s started unspecified talks and calls to Benjamin Mophatlane, the Chief Executive Officer, and finance head, Vanessa Olver, weren’t immediately returned.

‘Head Office’

With as many as a third of Africa’s population carrying mobile-phones, companies such as Bharti Airtel Ltd. of India will seek other markets to gain a foothold. The company spent $9 billion to purchase the African assets of Kuwait’s Mobile Telecommunications Co., giving it access to 15 African markets, after failing in merger talks with MTN Group Ltd., the continent’s largest mobile-phone operator.

While takeovers won’t be limited only to South Africa, as the continent’s biggest economy its infrastructure and regulated financial markets give foreign companies the confidence to make big bets on the lure of using the nation as a springboard into countries such as Kenya and Nigeria.

South Africa is like the “head office for the rest of Africa” Shapiro said. “It’ll be a service centre” for expansion.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net.

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net.

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