The boards of Amsterdam-based Prosus and Naspers have announced that Prosus intends to acquire up to 45.4% of shares in Naspers, its South Africa-based parent company. Prosus owns a 28.9% stake in Tencent, the Chinese software and gaming behemoth. Both Prosus and Naspers trade at a discounted value to their stake in Tencent, which according to market reports this morning is worth over EUR170bn. The Naspers discount is steeper, however, and new shares in Prosus will be issued with the deal set to result in shifting a large part of the value of their considerable stake in Tencent to Europe from Africa.
This morning’s RNS announcement notes that “the proposed transaction is expected to more than double the effective economic interest of the Prosus free float in the underlying Prosus portfolio to 59.7% and create value for Naspers and Prosus shareholders.”
Naspers, has a controlling stake in Prosus and would retain control of that company. It believes the deal will improve valuations for both companies. We note that in mid-2019 Naspers spun its Tencent stake and other international investments (including positions in Delivery Hero, PayU and AutoTrader) into Prosus and listed that on Euronext, retaining a meaningful stake in Prosus
Background on Prosus and Naspers
“The Naspers group has a long history of value creation, identifying and investing in attractive growth opportunities around the world and generating returns for shareholders. This investment strategy led to the rapid growth of the group, creating value for all shareholders. By August 2019, however, Naspers’s size, at c. 25.9% of the JSE Shareholder Weighted Index (SWIX), had become unsustainable. Many South African-based investors have single share limits and mandate restrictions, which led to forced selling of Naspers shares as it meaningfully outperformed the Johannesburg Stock Exchange (the “JSE“). We believe this forced selling contributed to a widening of Naspers’s discount to NAV.
To begin addressing this structural issue and to unlock value for shareholders, Naspers listed Prosus on Euronext Amsterdam (the AEX) in September 2019. The Prosus listing successfully unlocked US$16bn of value for shareholders at the time of execution. The Prosus listing also created Europe’s largest listed consumer internet company, providing a strong platform to attract incremental investor capital to support the Prosus group’s continued growth ambitions.
Based on the Prosus group’s consistent outperformance, however, it was clear that further action would be required in the future. Since the Prosus listing, Naspers’s weight on the benchmark SWIX has increased back to c. 23.3% 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 lsting and the significant outperformance of consumer internet companies in 2020/2021.
Under the proposed transaction, Prosus will acquire up to a maximum of 45.4 % of the issued Naspers N ordinary shares such that following implementation of the proposed transaction, in conjunction with any Naspers N ordinary shares already held by Prosus, it will hold no more than 49% of the issued Naspers N Ordinary Shares, providing it with a 49.5% economic interest in Naspers. The proposed transaction will be subject to a minimum acceptance condition of 45.4% of the issued Naspers N ordinary shares.
If the proposed transaction is fully taken up by Naspers shareholders, it is expected that Naspers’s holding of issued Prosus ordinary shares N will reduce from 73.2% to 57.2% post-implementation, and that Prosus will hold 49% of the issued Naspers N Ordinary Shares, providing it with a 49.5% economic interest in Naspers. Due to the cross holding in Naspers by Prosus, the effective economic interest of the Prosus free float in the underlying Prosus portfolio is expected to more than double to 59.7%.
The proposed transaction is voluntary, and Naspers N shareholders that do not elect to tender their Naspers N ordinary shares to Prosus will retain their holdings in Naspers in full.
The full terms of the proposed transaction will be detailed in the documents required to be issued by Prosus in due course.”
[This is excellent news for Aberdeen Emerging Markets and AVI Global. Aberdeen Emerging Markets has been building its stake in Naspers (a rare investment in a holding company for it), to increase its exposure to China while Naspers represents one of AVI Global’s largest holdings. Both funds were attracted by the fundamentals behind the Nasper businesses (especially Tencent) and the Naspers level discount that has existed.]
AEMC/AGL: Major Tencent shareholder Prosus to buy up to 45.4% in parent Naspers
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