WALMEX to acquire Walmart Centroamerica

17 Dec '09

5 min read

Walmart de México Board of Directors has convened a shareholders' meeting on December 22, 2009 to submit the transaction for shareholder approval. The transaction to be submitted contemplates the consolidation of Walmart Centroamerica in Walmart de México, resulting in the exchange of Walmex shares and a cash payment.

Walmart de México Audit and Corporate Practices Committee, comprised exclusively by independent directors, met on November 23, 2009, and resolved to recommend that the Board of Directors approve the transaction, considering all relevant factors, which include the fact that the transaction is beneficial for all Walmart de México shareholders.

The Committee took into consideration the participation of a related party, Wal-Mart Stores, Inc., and concluded that there is no impediment to recommending and executing the transaction due to the benefits foreseen, the fact that the negotiations were carried out and the terms and conditions were established under market conditions, and that the operation is beneficial for the corporation and all of its shareholders.
Walmart de Mexico's Board of Directors approved this transaction in a Board Meeting held on November 23, 2009.

Most of the transaction shall be paid through the issuance of Walmart de Mexico new common stock, which will be issued as a result of the merger of the two companies. Wal-Mart Stores, Inc. and a substantial percentage of Walmart Centroamerica minority shareholders agreed to receive new Walmart de Mexico shares. A smaller portion of the minority stockholders agreed to receive a cash payment for their participation in the transaction.

Cash payments totaling an approximate $ 1.4 billion pesos, shall be paid with Walmart de Mexico's current cash resources. Approximately 593 million new shares will be issued to the shareholders of Walmart Centroamerica, without dividend rights that might be declared corresponding to Fiscal Year 2009. The exchange factor for stock comes from relative valuations of the companies to be merged.

Moreover, as part of the acquisition price, payments will be later made both in cash and in Walmex shares. Thus, the Board of Directors will suggest that the Shareholders Assembly authorize the issuance of 55 million shares that will remain as Treasury shares, neither subscribed nor paid, to be delivered to current Walmart Centroamerica shareholders, in the case that the acquired corporation meets the requirement of achieving a specified profitability level.

Walmart Centroamerica profitability is to be assessed annually, for a term that may be extended to ten years. Upon termination of said term, all Treasury Shares resulting from this transaction, and which have neither been subscribed nor paid, shall be cancelled.

Potential Benefits of the Operation:
The Central American consumer is similar in many aspects to the Mexican consumer, so this operation represents an important opportunity for creating synergies, sharing of talent and best practices, and increasing the profitability of both companies. Thus, this merger represents a strategic step in Walmart de Mexico's expansion plans, as it brings an additional source of continuous profitable growth that adds to the already existing attractive growth potential that Mexico offers.

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