In a transaction that surprised exactly no one, Walmart Inc. (NYSE: WMT) and the United Kingdom’s J Sainsbury have agreed to a deal in which Walmart sells its U.K.-based Asda Group to Sainsbury for $3 billion in cash and a 42% stake in the combined British company.
Walmart acquired the Asda supermarket chain in 1999 but in recent years the retail grocery landscape in Britain has become more populated with low-price competition from Aldi and Lidl. Long-time competitor Tesco also has come on strong, and the ever-present Amazon.com Inc. (NASDAQ: AMZN) has also made it more difficult for Walmart to grow.
The Arkansas-based firm is deep in negotiations for a substantial stake in India’s Flipkart Group, that country’s largest e-commerce player. According to a report in India’s Economic Times, Walmart may obtain three or four seats on Flipkart’s board, but Amazon is also considering taking a stake in the Indian startup. Japan’s Softbank owns a 20% stake in Flipkart and is said to favor a bid from Amazon, if one is forthcoming.
Walmart is reportedly seeking a majority stake in Flipkart that could cost the U.S. firm more than $12 billion. Walmart owns a 12% stake in Chinese e-commerce firm JD.com Inc. (NASDAQ: JD).
Private equity firm Advent International is reportedly in discussions with Walmart to acquire an 80% stake in the mega-retailer’s Brazilian business.
In its announcement of the sale to Sainsbury, Walmart noted that it expects to recognize a non-cash loss of approximately $2 billion based on the current value of the shares to be received from Sainsbury and current foreign exchange rates. The timing of the loss is unclear and could be as late as the second half of next year, depending on how quickly the transaction makes it through regulatory review.
Walmart stock traded up about 0.1% in Monday’s premarket at $87.40, in a 52-week range of $73.13 to $109.98. The 12-month consensus price target on the stock is $105.28.