Prosus offer ‘idiotic’
NASPERS: WILL ‘CREATE A TWO-HEADED MONSTER’ AS PROSUS OWNS IT’ Move certain to increase the discount between share prices and value of underlying assets.
ASwiss-based research and investment management firm, Alternative Investment Management & Research (AIM&R), says the proposed share swap between Naspers and Prosus is an “idiotic idea” that is certain to increase the discount between the share prices and the value of the underlying assets.
“In my 35-year career of analysing, investing and restructuring in global holding companies, I have never ever seen a situation where a holding company would create another layer of complication in order to reduce a discount,” says AIM&R founder and director Albert Saporta in an open letter addressed to Naspers and Prosus CEO Bob van Dijk and sent to Moneyweb, Bloomberg, Financial Times and The Wall Street Journal.
“It makes no sense whatsoever. Indeed, holding companies that actively want to durably reduce a discount simplify structures, rather than complicate them, usually through major asset spinoffs and major share buybacks, something that Naspers has never done,” says Saporta. Saporta has previously criticised Naspers for not doing enough to unlock value for shareholders.
‘Two-headed monster’
“However, not content [in] having created a 2-layer pyramidal structure into Tencent, you are now proposing an even more idiotic idea, and that is for Prosus to tender for Naspers’ shares.
“If this tender is successful, you will create a two-headed monster of a corporate structure where Prosus owns Naspers and Naspers owns Prosus, in a cross-shareholding structure – probably the most inefficient capital structure one can think of,” Saporta writes in his open letter.
“I can guarantee that the creation of the two-headed corporate monster, ie a cross-shareholding structure, will lead to a higher discount for both Prosus and Naspers post-tender, possibly the highest ever seen.
“The reasons are clear: more complication, more confusion, and less governance cannot lead to a lower discount. Only simplification and transparency work.” Saporta offers an example of a similar company structure to prove his point – a Hong Kong group, Jardine Matheson and Jardine Strategic, that had a cross-shareholding structure: “Both sold at unusually large discounts for years, if not decades,” he says.
End result simple
Van Dijk, who is CEO of both Naspers and Prosus, rejects these arguments.
“It is evident from the letter that they do not understand all the considerations,” Van Dijk told
Moneyweb in an exclusive interview, adding that AIM&R never engaged with Naspers directly.
“The choice is straightforward. We can watch Naspers’ weighting continue to climb on the SWIX from its already unprecedented 23%, or bring it down to 14%.
He admits that the process seems complicated and that the technicalities aren’t simple.
“While the execution steps seem complex, the end state is not. We have an Amsterdam-listed European consumer internet leader and a Top 20 Euro Stoxx 50 company and one of the fastest growing internet groups. It will be owned 60% via Amsterdam and 40% via the JSE.
“Amsterdam shareholders get their full 60% share of any distribution from Prosus directly and JSE shareholders will also get their 40% as Naspers onward distributes to them. There is nothing complicated about that.”
Admits that the process seems complicated