DealZone

from Breakingviews:

Wal-Mart sounds pricy vuvuzela on African growth

Wal-Mart <WMT.N> has finally sounded the vuvuzela on African expansion. After months of speculation about how it would try to capitalize on the continent's growth, the U.S. retailer is offering $4.2 billion to acquire South Africa's Massmart Holdings <MSMJ.J>. The price could grate on shareholders' ears. But the deal gives Wal-Mart a local vehicle -- and local knowledge -- to help it gain access to a market with a profile that should suit it well.

If the deal is accepted by Massmart, Wal-Mart will be paying close to 13 times the Johannesburg-based retailer's EBITDA. For a company that trades at closer to 7 times, that's a big premium, albeit a drop in the bucket against Wal-Mart's nearly $200 billion market capitalization.

But Wal-Mart will get a foothold in what should be a bright spot in the world's growth map. South Africa, where Massmart operates 232 stores from Limpopo in the northeast to the Western Cape, is one of the CIVETS economies (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) widely hailed as the next sizable emerging markets.

The International Monetary Fund estimates sub-Saharan output will grow nearly 6 percent per annum from 2011. Capitalizing on this would be a stretch for Wal-Mart from its Bentonville, Arkansas headquarters. Sure, the retailer has become a smart international operator and broadly understands poorer shoppers, something Africa has in unfortunate abundance. But Wal-Mart would lack local knowledge in a new market.

Piggybacking on Massmart's business makes African expansion a much less risky proposition for the U.S. giant. From its home market where it operates a variety of retail formats, the South African group has been rolling out its Game mass-discount stores in Botswana, Ghana, Malawi, Mozambique, Namibia, Zambia and elsewhere.

DealZone Daily

The Dubai government unveiled plans to recapitalise its indebted Dubai World flagship and repay Nakheel bonds in full, injecting what it said was $9.5 billion in new funding, but without new aid from Abu Dhabi. Read the Reuters story here.

Bharti Airtel looked set to wrap up its $9 billion deal to buy most of Kuwaiti telecom group Zain’s African assets, giving India’s top mobile operator a foothold in the frontier market after two failed attempts to buy South Africa’s MTN. Read the Reuters story here.

For more on these and the rest of the latest deal-related news from Reuters, click here.

Adelson splashes the pot in Asia

Sands China’s weak debut in Hong Kong - a first-day drop of 10 percent – was the fourth-worst launch on that market this year, but came as little shock to analysts who were betting against the Asian gambling play. Rival Wynn Macau is down 5 percent since listing in October.

Sands China’s $2.5 billion IPO wasn’t helped by the default tremors kicked off by Dubai, which has helped to expose a whole new area of risky bets in emerging markets.

“The fever for casino stocks is seen to be over now,” said Patrick Yiu, a director at CASH Asset Management. “Investors are worrying about the industry outlook, especially keen competition, when more casinos are ready for business.”

from Summit Notebook:

Expect action in Japanese M&A

After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.

There won't be a flood of deals, Recof President Hikari Imai says, but the ones there are, are likely to be chunky as Japanese companies expand their frontiers beyond domestic markets where growth prospects are limited.

Geographically the focus is likely to be Asia -- China, India in particular and possibly the Philippines or Australia. And the types of companies looking abroad will broaden as well, Imai told the Reuters Japan Investment Summit.