THE WINNING DEAL:
THE BEST DEAL of the project was a proposal to see Google acquire a 50.1% stake in South African media and technology group Naspers for R231m. The deal would comprise a sum of R187.9m being paid for Naspers ‘ N’ shares, which represent 1 5% of the voting rights, and another R43.3m for ‘A’ shares, which represent 34.9% of the voting rights. SYNERGIES IDENTIFIED WITH THE DEAL
intellectual property and operational scope of Google and Tencent, which is owned by Naspers.
expertise and Google TV will enhance Naspers’s payTV footprint in Africa.
anal ytics and database skills augment Naspers’s e- commerce and Internet platforms.
in emerging and
in emerging markets serve as a launch pad for Google products.
(electronic retailing) through Naspers’s existing platforms.
Sasha Naryshkine, from asset management firm Vestact (who holds both Google and Naspers i n client portfolios), says that while the proposed deal was interesting, he doesn’t see it happening. “Google has a lot on its plate r i ght now and you have to remember that while Google might own 30-plus businesses, 90% of its revenue still comes from the traditional advertising business.” THE VIEW While the deal in principle sounds interesting and is a classic case of a developed- market technology business buying into an emerging-market company, we think that shareholders would not be winners in this transaction due to a strategy clash. While Naspers is regarded as ‘cheap’ by the investment community, analysts polled by FT.com say that the median 12-month price target is R1 050/share for the ‘ N’ shares. The R1 099/share is a little rich, and one can expect that the ’A’ shareholders will demand a significant premium in any deal that is put on the table. UNLIKE a number of the other groups involved in the project, the winning team had to tackle the issue of the unique management structure at Naspers, with CEO Koos Bekker not being directly remunerated for his contribution to growing the business.
The proposed deal saw key executives being retained for a 24-month period, with Bekker being retained for a three-year period whereafter he could rescind or renew his contract. The groups proposed that Bekker would receive performance bonuses to ensure his dedication to the merged entity. While Bekker retained management control, Google could place two members on the Naspers board.
Fortunately for Naspers employees – this editor included – the students built in a clause to ensure that no mass retrenchments would be on the cards for at least 18 months after the deal.