Prosus loses out on another big-ticket deal

The big deals that Prosus should be winning are slipping through its fingers.

Late last year, Takeaway.com trumped Prosus’s bid for Just Eat. Now EBay’s classifieds business is being scooped up by Prosus’s smaller Norwegian rival, Adevinta, for $9.2 billion (about R151 billion).

It’s not a great start for a company set up to be a deal machine. Prosus was spun off from Naspers in September with a stable of promising e-commerce businesses, big ambitions and plenty of cash for takeovers.

Those bold intentions were on display when EBay set up an auction of its classified ads unit and Prosus weighed in with the highest cash bid, according to people familiar with the matter.

It was still in pole position going into the weekend, yet ended up losing out to a company whose market capitalisation was around one 20th of its own.

EBay’s board had an 11th-hour change of heart and ditched its plan for an outright sale so it can keep a stake in the business, said the people, who asked not to be named as deliberations are private.

This would also potentially avoid the huge tax bill from an outright sale and keep some exposure to an asset that’s riding high since virus lockdowns, they said.

Adevinta poses less of a competitive threat to EBay than Prosus in important markets such as Germany and the UK. Prosus executives were unwilling to add sufficient cash to compensate EBay for those concerns, the people added.

Naspers hoped its classifieds, online food delivery and payments activities across the globe would be worth more if it hived them off into a new entity and spun it off, while holding onto almost three quarters of the business.

While Prosus shares have risen 16% this year and the company has made a handful of smaller acquisitions, it’s not been enough to narrow a discount in value between Naspers’ own market capitalisation and its stake in Chinese internet giant Tencent Holdings.

Investor concerns that Prosus may overpay in M&A deals is one reason the company isn’t worth more, Goldman Sachs Group analysts said in a recent note.

Prosus should spend its money on taking bigger stakes in its existing businesses and investing in their growth, said analysts at New Street Research.

One of those is Brazil’s iFood. Prosus already owns most of the company and is in talks to acquire another 33% of the online food delivery business. – Bloomberg