THE WIN­NING DEAL:

Finweek English Edition - - COMPANIES & INVESTMENTS - 1. The com­bined re­search and de­vel­op­ment ca­pa­bil­i­ties, 2. Google’s know-how, 3. Google’s wealth of in­for­ma­tion, 4. Growth op­por­tu­ni­ties for both Naspers and Google 5. Naspers In­ter­net and e-com­merce pres­ence 6. Ex­pos­ing Google to e-tail­ing

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.

de­vel­oped mar­kets.

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.

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