Naspers considers minorities buyout
Naspers is considering spending up to $2.4bn (R28bn) on buying out minority shareholders of certain portfolio companies, says CEO Bob van Dijk.
The internet holding company is looking for ways to spend its new war chest, worth $9.8bn (R115bn), which it gathered by trimming its stake in Chinese technology firm Tencent last week.
Naspers has put and call options worth about $2.4bn to acquire the shares it does not already own in companies it bought into several years ago, and could soon exercise those rights.
Van Dijk suggested Naspers could buy out co-investment partners or founders in Russian classifieds website Avito and Romanian online retailer eMAG, among other group companies.
Since Naspers was trading at a discount of about 40% to the value of its holdings, the group would buy out minority shareholders using cash, rather than by issuing shares, so as not to dilute the base further, management said.
Van Dijk said Naspers would not necessarily exercise all of its rights and could retain its founder or co-investment partners for longer.
The group would spend “the vast majority” of its Tencent share sale proceeds on building its classifieds, payments and online food delivery units, he said. The investments should result in the company’s broader e-commerce business turning profitable sooner.
A smaller portion of the funds would be spent on settling employee options with cash. In the past, it had done so by issuing new shares — to the ire of some investors whose stakes were being diluted.
Investec said in a recent report that Naspers’s share dilution attributable to employee stock options had averaged 1.9% a year, though Naspers rebuffed this claim, telling Bloomberg the dilution amounted to 0.9% a year.
Van Dijk said on Friday the figure used by Investec “is a complete red herring”.
“If you look at our sharebased compensation costs compared to our revenue or market cap, it’s literally a small fraction of our peers. It’s a tenth of what a company like Google does, as an example, and we have said we will not issue fresh shares for employee equity compensation anymore when the discount is like it is.” Van Dijk said that Naspers was looking for acquisitions, although “there’s no specific big one that we’re looking at the moment”.
Its investments team is about to get a new head. Fahd Beg, who joined Naspers from Citigroup in 2017, will take over as chief investment officer from April, succeeding Mark Sorour.
Van Dijk said Naspers would remain largely focused on emerging markets and was most optimistic about
India, where its investments included a stake in e-commerce group Flipkart.
“We’re also looking at other parts of the world. There are opportunities in Africa, many of those are early stage but quite exciting, and Eastern Europe is still very important for us, as is Latin America.”
In SA, Naspers wanted to grow its Takealot business, particularly the Mr D Food unit.
“We love the food delivery space, and Mr D Food has made a great transition to a fully online business model and we’ve agreed to speed up our investments there,” Van Dijk said.
Mr D Food had more than doubled in size over the past year, “and we think there is still much more upside”.
Meanwhile, Van Dijk said although Naspers would not sell any more Tencent shares for three years, it could use the shares it held for secured debt funding or other means.
The decision to hang on to its 31.2% stake was premised on Tencent’s strong growth prospects and “because we don’t want to create an overhang for Tencent – that would not be in their interests nor in ours”, he said.