Prosus aims to buy back Naspers shares

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By Loni Prinsloo

(Bloomberg) – Prosus NV plans to buy back a combined $5 billion of shares in the global e-commerce giant and its South African parent Naspers Ltd., a move designed to boost shareholder value and narrow a discount between the company and its stake in Tencent Holdings Ltd.

The group will aim to pick up $1.37 billion of its own stock and $3.63 billion of Naspers, Amsterdam-based Prosus said in a statement on Friday. The purchase will start following the release of half-year earnings on Nov. 23.

The move marks the latest in a series of efforts by Prosus and Naspers to achieve a valuation greater than the sum of its parts, and stop being seen as merely a proxy for investing in WeChat-creator Tencent. Cape Town-based Naspers was an early-stage investor in China’s Tencent, and still holds a 31% stake, but has long been overshadowed by the soaring stock price of its prized asset.

Naspers spun off most of its internet assets into Prosus just over a year ago in part to resolve the problem, but the move has made little difference. Prosus has a market capitalization of about 135 billion euros ($158 billion), while the Tencent stake is worth about 193 billion euros at current share prices.

That means the market assigns a negative value to Prosus’s myriad other businesses, which span from Indian online travel agents to Brazilian food delivery and U.S. education sites.

Failed acquisitions

The buyback also reflects a failure to spend a bloated cash position on major acquisitions in the booming e-coommerce sector. The company lost an $8 billion battle to buy U.K. food group Just Eat Plc to Takeaway.com earlier this year, and in July lost out in a $9 billion auction for EBay Inc.’s classifieds business to Norwegian rival Adevinta ASA.

“The proposed transaction is a timely investment in the group’s strong internet portfolio, which is a sensible use of capital given full market valuations in consumer internet M&A,” Prosus said.

Prosus shares gained 0.4% in Amsterdam to 83.20 euros, representing a 12% gain since listing in

Naspers media statement:

The board of Prosus today announced its intention to acquire up to US$5 billion in total of Naspers and Prosus shares. This is a further step to crystalise value for shareholders. It follows earlier actions such as the unbundling of MultiChoice Group and the listing of Prosus on Euronext Amsterdam last year. The purchase of Naspers and Prosus shares also represents a meaningful investment in the group’s strong internet portfolio. It is regarded as a good use of capital, given full market valuations evident in consumer internet M&A and the group’s sizeable consolidated discount to net-asset-value (NAV). 

Bob van Dijk, Chief Executive Officer of Prosus and Naspers, said: 

“We have found several large M&A opportunities in our sector to be fully priced and have stayed disciplined. Utilising cash to own more of our current portfolio through a purchase of our own shares – when the discount to NAV is sizeable – is a sensible use of capital.” 

Basil Sgourdos, Chief Financial Officer of Prosus and Naspers, said: 

“Over the years, our group has achieved improved financial flexibility. It has built a portfolio of ecommerce assets with significant cash-flow generating capabilities. The group is now in a position to both invest in its asset portfolio, and to purchase its own stock when it makes sense from a returns perspective.” 

Management and the Naspers and Prosus boards are committed to delivering long-term returns for shareholders. We will also continue working on a series of initiatives to further address the consolidated discount to net asset value.” 

Transaction Structure 

In total, up to US$5 billion in shares in Naspers and Prosus will be purchased on the open market on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base. 

These purchases will be funded from cash resources. Prosus intends not to vote the Naspers shares acquired. It is expected that the Naspers shares acquired will be held in treasury and will thus be excluded from Naspers per share financial metrics. 2 

Prosus intends to launch the purchase following the release of its results for the six-months ended 30 September 2020. This is expected on 23 November 2020. The purchases and programmes will be implemented opportunistically and in such manner as can be comfortably executed in the market. 

NASPERS SUBSIDIARY PROSUS ANNOUNCES ITS INTENTION TO ACQUIRE UP TO US$5 BILLION OF NASPERS AND PROSUS SHARES 

Shareholders are referred to the announcement issued by Naspers’s subsidiary Prosus N.V. (Prosus) today in respect of its intention to implement: 

  •  an on-market Prosus ordinary share N repurchase programme of up to US$1.37 billion from its free-float shareholders (the Share Repurchase); and 
  • an on-market Naspers Limited (Naspers) N ordinary share purchase programme of up to US$3.63 billion (the Share Purchase, together with the Share Repurchase, the Proposed Transaction). 

Prosus intends to launch the Proposed Transaction following the release of its results for the six months ended 30 September 2020, expected to be announced on 23 November 2020. 

The Share Purchase by Prosus constitutes a general repurchase of securities under the JSE Listings Requirements and will be implemented in accordance with, and subject to, the relevant authorities granted by Naspers shareholders. 

The board of directors of Naspers believes the purchase of Naspers N shares and the repurchase of Prosus ordinary shares N represent a timely investment in the group’s strong internet portfolio and a sensible use of capital given full market valuations evident in consumer internet and the group’s sizeable consolidated discount to net asset value. 

PROSUS ANNOUNCES ITS INTENTION TO ACQUIRE UP TO US$5 BILLION OF PROSUS AND NASPERS SHARES 

Prosus today announces its intention to implement: 

  • an on-market Prosus ordinary share N repurchase programme of up to US$1.37 billion from its free-float shareholders (the Share Repurchase); and 
  • an on-market Naspers Limited (Naspers) N ordinary share purchase programme of up to US$3.63 billion (the Share Purchase, together with the Share Repurchase, the Proposed Transaction). 

Today’s announcement marks another step in Prosus’s continuing creation of shareholder value and reflects its focus on reducing the current discount of the share price to Prosus’s net asset value (NAV) over time. The board of directors of Prosus (the Prosus Board) is of the view that the Proposed Transaction is a timely investment in the group’s strong internet portfolio, which is a sensible use of capital given full market valuations in consumer internet M&A, and the sizeable discount to the group’s NAV. 

Prosus has a track record of generating good returns by investing across the consumer internet space. The group takes a long-term approach to capital allocation across its operations and investments, and this approach now extends to its asset base – directly and indirectly via its own stock. The Prosus Board believes that the Proposed Transaction will generate value for shareholders. 

Prosus intends to launch the Proposed Transaction following the release of its results for the six months ended 30 September 2020, expected to be announced on 23 November 2020. 

The Proposed Transaction will be implemented in accordance with, and subject to, applicable law and regulations, as well as the authorities granted by Prosus’s and Naspers’s shareholders, as applicable. 

Prosus intends not to exercise any voting rights attaching to the Naspers N ordinary shares acquired under the Share Purchase. 

Shareholders will be updated on further details relating to the implementation of the Proposed Transaction in due course. 

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