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Prosus media statement:
- Proposed transaction creates value for both Naspers and Prosus shareholders
- Positions Naspers and Prosus for sustainable success on JSE & AEX
- Naspers remains domiciled in South Africa as largest listed company
- Generates tax payments in SA, no change to tax approach
- Will investigate further steps to further reduce discount to NAV
On Wednesday, 12 May 2021, Prosus announced its intention to acquire 45.4% of the issued Naspers shares from Naspers shareholders by a voluntary share exchange offer of new Prosus shares for Naspers shares. The announcement generated some frequently asked questions, which Prosus is pleased to address:
What is the background to this transaction?
As a result of outperformance of the JSE average over many years, Naspers has become approximately 23.3% of the JSE SWIX index (in April 2021). This causes a problem in that many funds are not allowed to hold such a large percentage of their assets in one stock. The problem will worsen if the group’s investments in social platforms, food delivery, classifieds, edtech and fintech continue to grow faster than the average on the JSE. Given Naspers’s current concentration on the JSE and potential future outperformance, it is necessary to sustainably right-size Naspers and Prosus.
At the Prosus level, the proposed transaction materially increases the Prosus free float on the Amsterdam Exchange (and more than doubles the free float’s economic interest in the group’s underlying assets). This should place Prosus within the Top 20 shares on the EURO STOXX 50 Index, which should attract new classes of investors. This will increase the liquidity of Prosus and aid its future trading potential.
Post-transaction, Naspers would remain South Africa’s largest domiciled company and continue to control Prosus as it does at present. The proposed transaction provides sustainable, clear and lasting control of Prosus by Naspers, ensuring that Prosus remains a Controlled Foreign Company of Naspers.
Which taxes are triggered immediately by the transaction?
Share transfer tax payable by Prosus in South Africa is estimated to be R1.8bn. As is usual for other transactions of this nature, there is no Capital Gains Tax (CGT) at the corporate level for Naspers or Prosus.
Accelerated CGT will apply to some South African shareholders who accept the offer, which is tax that they would otherwise pay when they realised gains on their Naspers shares. This is estimated to generate between R2.4bn in South African taxes.
What happens to future tax paid by the group?
Tax is an important element of the broader economic and social contribution the group makes. The underlying Naspers and Prosus businesses will continue to pay taxes where they operate and where their users and consumers are based.
In FY20 Naspers contributed an estimated R10.2bn in taxes in South Africa. This was 70.8% of the group’s global tax contributions. Naspers’s normalised effective tax rate for FY20 was a relatively high 28.13%.
The proposed transaction does not alter the group’s approach to tax, nor its tax status. Post-transaction, Naspers would remain a South African tax resident. Prosus would remain a Controlled Foreign Company of Naspers within the South African tax remit. Naspers and Prosus together would remain part of the same group for South African tax purposes.
Full details of the proposed transaction are available at www.share-exchange- offer.com.
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