Van Dijk cures Naspers aches

It is turning out to be a good year so far for Bob van Dijk, the Dutchman running the show at Africa’s most valuable company, Naspers. He probably opened a bottle of champagne last week, when Prosus, Naspers’s international e-commerce business, made a sparkling stock market debut in Amsterdam. In the process it went a long way towards solving his biggest headache: a hefty valuation gap between Naspers’s components.

Van Dijk, a rare appointment in 2014 of an outsider to Naspers’s top job, inherited an emerging-market internet powerhouse thanks to the company’s one-third stake in Tencent — whose breakneck ascent kept shareholders happy with an uninterrupted flow of dividends and made chair Koos Bekker’s $32m (about R570m today) bet in the then little known Chinese upstart in 2001 one of the most successful punts in corporate history.

But when the stake — now valued at an equivalent of R1.9trillion — began eclipsing Naspers’s own market value and underlying assets, investors started urging Van Dijk to narrow it. One was Albert Saporta of Geneva, Switzerland, who tried and failed to put pressure on Van Dijk to hive off the Tencent holding to shareholders as a way to get rid of the value shortfall.

Worsened by investor scepticism over the lack of a clear path to profitability for the rest of the company’s e-commerce ventures, the discount at times widened to as much as 50%.

For a few years, Naspers largely dismissed suggestions to sell or spin off and separately list the Tencent stake because at this company only two shareholders really call the shots: Keerom and Naspers Beleggings. The duo control 53% of the votes through ownership of more than 900,000 A-class stocks, which carry 1,000 times more votes per share than listed N-class shares.

This structure — which is down to the company’s roots as a newspaper publisher and was meant to deter outsiders from dictating editorial policy — is being replicated at Prosus.

Only in the past two years, when the oversized Naspers weighting on the JSE worsened the valuation mismatch did Van Dijk, who had been telling investors the gap would be closed as the company’s other e-commerce ventures turned profitable, get the go-ahead to take meaningful steps to resolve the issue.

The listing of about a quarter of Prosus, which houses Naspers’s global e-commerce assets, including its holding in Tencent, is the biggest step yet, and so far it is doing the trick.

It is a well-calculated plan as it gives European institutional investors, starved of big technology stocks, their biggest consumer internet firm and Euronext its third-largest company after oil titan Royal Dutch Shell and consumer foods maker Unilever.

As of Thursday, Prosus’s market cap of R1.8-trillion is about 6% less than its stake in Tencent. Given that Naspers is worth roughly 10% less than the value of its stake in Prosus, Van Dijk has dramatically slashed the gap in half compared with about a third earlier in 2019.

Prosus’s valuation is still about 22% less than its net asset value of about $150bn (the total value of its assets minus liabilities), say some analysts. Many find it difficult to assess the true underlying value of the mix of assets, including stakes in publicly traded ventures such as India’s travel booking firm MakeMyTrip and several unlisted platforms such as classified site Letgo.

But that’s more or less in line with a discount range of 15%20% applied to technology investment holding companies.

The deal adds to a number of other steps Van Dijk has taken over the past few months. He has spun off and separately listed pay-TV unit MultiChoice, handing shareholders a company valued at more than R50bn. And he can hold up online classifieds as a Prosus division that is starting to make money.

Though the listing of Prosus does not deal with its off-putting control structure or supply enough evidence that the new entity will not squander the remaining $6bn Tencent windfall, it has given Van Dijk and shareholders a reason to smile.

THE CEO HAS DRAMATICALLY SLASHED THE GAP IN HALF COMPARED WITH A THIRD EARLIER IN 2019