Prosus announces R76 billion share buy-back programme

PROSUS’S share price slipped 1.38 percent to close at R1 210 yesterday after hitting a high of R1 257 in intraday trade as the company announced a year-long $5 billion (R76bn) share buyback programme.

The tech investor commenced an on-market share repurchase programme of its ordinary shares from its free-float shareholders following its massive share-swop deal with parent company, Naspers. It said this was in support of delivering the overall benefits of the Prosus voluntary share exchange offer to unlock value for Naspers ordinary shareholders.

Last week, Naspers completed a R145bn share-swop deal with Prosus to rebalance their weighting on a number of indices on the JSE, leading to delayed reopening of trading on the local bourse on Wednesday.

The share swop resulted in Naspers reducing its stake in Prosus from 73.2 percent down to 57 percent and retaining its control, while Prosus increased its total issued share capital of Naspers to 45.33 percent.

Prosus, with a primary listing on Euronext Amsterdam and secondary listings on the JSE, appointed an intermediary to execute the share buyback programme within parameters set by it, allowing the execution of the programme during open and closed periods. During closed periods, the intermediary will make its trading decisions independently from, and uninfluenced by, Prosus.

Prosus said the share buyback programme commenced yesterday and would end on August 19 2022, or sooner if the maximum consideration was reached before then.

“The total consideration includes costs and related taxes. Prosus intends to cancel the ordinary shares repurchased by it under the programme in due course, so as to reduce its issued share capital,” it said.

The group would provide weekly updates on the programme by means of press releases and announcements on the SENS, and on its website.

Prosus was spun out of Naspers in 2019 to hold the South African group’s international assets, including its 30 percent stake in Chinese gaming and social media giant, Tencent.

Tencent, the world’s largest gaming firm by revenue, has seen rising earnings in spite of Chinese regulators having stepped up a sweeping antitrust clampdown on its internet giants.

Flagship Asset Management fund manager Pieter Hundersmarck said he disliked the Naspers/Prosus groups for their unaligned business structure.

He said Naspers management was enriching themselves by being passive owners of an asset they add little value to while investing the proceeds of share sales and dividends from Tencent into a swathe of internet businesses where they have shown questionable expertise. “The Naspers group is suffering from the worst example of the agency problem I have seen in my investing career,” he said.

Hundersmarck said the group continued to trade at an elevated discount to its net asset value, despite management’s various attempts to change this by reducing its stake in Tencent, the listing of Prosus, and share buybacks.

He said he expected the complexity of the recent corporate action to dilute the benefits of a greater Prosus weighting in the EuroStoxx 50.

“Poor management is the greatest affliction at Naspers. Downside risks are that management claims they are doing all they can to lessen the discount but have instead made it worse,” he said.