The Star Late Edition
Naspers, Prosus in share swop deal to unlock value
JSE-listed global internet group Naspers yesterday announced a share swop deal with Dutchlisted Prosus in another step in the long journey of narrowing the discount that they trade at relative to the value of their shareholding in Chinese giant Tencent.
Prosus is set to acquire 45.4 percent of Naspers N shares in exchange for newly issued Prosus N shares in an attempt to close the gap between the underlying value of its assets and its market value.
Prosus said it would hold a 49.5 percent interest in Naspers on completion of the transaction, which was expected to be implemented in the third quarter of this year.
The transaction would result in the economic interest of the Prosus free float to more than double, from around 27 percent to 60 percent, with the free float market capitalisation of more than $100 billion (R1.4 trillion).
Chief executive of Naspers and Prosus Bob van Dijk said previously they had hoped to deal with the structural issues and to unlock value for shareholders, Naspers via the listing of Prosus on Euronext Amsterdam in September 2019.
However, they had had to take further actionbased on the Prosus group's consistent outperformance. “Since the Prosus listing, Naspers’s weight on the benchmark SWIX has increased back to about 23.3 percent in April 2021, again contributing to the widening of the discount to NAV. This is as a result of the rapid increase in value of the Prosus group’s portfolio since the Prosus listing and the significant outperformance of consumer internet companies in 2020/2021,” he said.
The share offer announced yesterday would extend Prosus’s standing as Europe’s largest internet company, he said.
“By increasing the size of the Prosus free float and more than doubling its ownership of the group’s outstanding global consumer internet portfolio, we create a stable construct that maintains the group's operational, strategic and financial flexibility. Prosus shareholders benefit directly as Prosus buys increased exposure to the underlying assets through its acquisition of higher discount Naspers shares,” Van Dijk said.
Peter Takaendesa, the head of equities at Mergence Investment Managers, said it was a complicated transaction involving the proposed increased cross-holdings between the two companies and the issue of a new shares as part of the exchange of ownership as well as to avoid voting rights dilution to undesired levels.
“It must have been a very difficult balancing act to accommodate the interests of many different stakeholders, but our initial view is that the proposed transaction should achieve some of the key objectives communicated by the management team over the past few years.
“These key objectives include finding solutions to reduce the size of Naspers on the JSE and to narrow the discount that Naspers trades at compared to the value of its underlying assets, without triggering material tax leakage at the group level,” Takaendesa said.
However, he cautioned that the exact impact of the proposed transaction would only be known after the results of the take-up of the offer by Naspers shareholders in the third quarter of this year.
Naspers shares were 1.60 percent lower at R3 123.88 and Prosus shares 2.66 percent higher to close at R1 466.62 on the JSE yesterday.