Naspers’ restructuring
UNLOCK VALUE: PROSUS’ OFFER TO SHAREHOLDERS TO ACQUIRE 45.4%
Proposal will introduce intricate cross-holding, trigger Capital Gains Tax.
Prosus and Naspers surprised shareholders with a proposed restructuring in an effort to reduce the discount to net asset value between Naspers and Prosus, as well as unlock some of the perceived value in Prosus.
In short, a share swap between Prosus and Naspers will see Prosus buying a large stake in its holding company Naspers. The announcement implies the share swap will remove some limits that fund managers might have to invest in both Naspers and Prosus shares, allowing them to increase their holdings.
Prosus is making an offer to Naspers shareholders to acquire a 45.4% interest in Naspers. The announcement says the transaction will increase Prosus’s interest in Naspers to 49.5%.
The result looks good for Prosus. Naspers is trading way below its net asset value (NAV) – with its 73.2% interest in Prosus making up most of the NAV.
Thus, by increasing its stake in Naspers, Prosus is planning to indirectly acquire its own shares and pay for them using its own shares. How the moving of the deck chairs will unlock value for inter alia Naspers and Prosus shareholders depends on the ratio Prosus management and their corporate advisors recommend for the share swap.
The proposed offer is higher than the Naspers share price to eliminate some of the discount to NAV, but lower that the full NAV to make it attractive to Prosus.
Prosus is offering Naspers 2.27443 Prosus shares for every one Naspers share. The initial announcement states 72.6% of the
value to be unlocked will go to Naspers shareholders, while Prosus will get 27.4% by still acquiring the Naspers shares under the full NAV.
The proposed transaction is also expected to more than double the free float of shares available to investors which it is believed will unlock value for both companies’ shareholders.
Naspers’ market capitalisation was nearly 26% of the value of the
JSE Shareholder Weighted Index towards the end of 2019, leading to the creation and separate listing of Prosus.
At the time, management
pointed out that many South African-based investors have single share limits and mandate restrictions, which led to forced selling of Naspers shares.
The Prosus listing helped for a while, but continued growth in Prosus against the rise in value of other companies on the JSE saw Naspers rise sharply again, putting it in the same situation.
The proposed transaction is designed to correct this.