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The discount-retail behemoth has made a preliminary bid to buy Massmart Holdings, a South African retail chain, for about $4.6 billion. Massmart's positioning fits very well with Wal-Mart's, since it's also a discount retailer that pushes tons of inexpensive merchandise to consumers.
Even more appealingly, this would give Wal-Mart the inside track in getting its gigantic toe into Africa, beating out formidable European retail rivals Tesco (Nasdaq: TESO ) and the world's second-largest retailer, Carrefour. International growth is one of many reasons my Foolish colleague Jim Royal made Wal-Mart his 11 O'Clock stock pick in late August.
Folks may like the stocks of other discount retailers, but chances are they don't have Wal-Mart's wherewithal to delve into new and potentially very lucrative markets. Sears Holdings (Nasdaq: SHLD ) has enough on its plate duking it out right here in North America, for example. Target (NYSE: TGT ) is a formidable Wal-Mart rival in the U.S., but it's also a U.S.-only retailer at the moment.
Over the years, Wal-Mart has displayed a good grip on international expansion -- a tricky and risky pursuit, especially when you're one of the first companies moving into a new region.
For Wal-Mart, the deal's $4.6 billion price tag may make this an expensive experiment in international expansion. Nonetheless, shareholders should be gratified that the retail behemoth is trying out new markets for additional growth -- and that it's financially strong enough to take such a gamble in these tough times.