South Africa’s Naspers has launched a share swap deal with Prosus, its Dutch-listed investment unit, in a move that will reduce the impact of its 29 per cent holding in China’s Tencent on local financial markets.
Tencent’s surging share price over the past year has caused Naspers to once again balloon to nearly a quarter of the Johannesburg bourse. This has forced South African investors to sell their shares to avoid concentration risk.
In response, Naspers has announced a share swap deal with Prosus, the Dutch-listed subsidiary that owns the Tencent stake.
Prosus has offered to buy 45 per cent of its parent in exchange for its own shares, Naspers said on Wednesday. The deal will give Prosus a 49.5 per cent economic interest in Naspers and raise the free float of what was already Europe’s biggest listed internet group to $100bn, it added.
Naspers will retain control of Prosus from its South African domicile. Prosus shares were up 3 per cent in morning trading.
Naspers is Africa’s biggest listed company because of its Tencent holding but its shares trade at a steep discount to the value of its stake, which led it to create and list Prosus in Amsterdam in 2019.
Prosus trades at a narrower discount to the value of the Tencent shares.
Prosus’ acquisition of Naspers shares “is intended to be a sustainable construct that addresses the structural issue” while keeping financial flexibility for the European listing, Naspers said.
The offer “preserves Naspers as the largest South Africa-domiciled company on the JSE and its control of Prosus”, said Basil Sgourdos, Naspers’ chief financial officer. “The discount is a concern we share with our shareholders,” he added.
More than a third of Prosus shares are already owned by European investors and the swap “is all around building on this,” Bob van Dijk, chief executive of Naspers and Prosus, said. “It’s a good structure for South Africa as well,” he said.
Since its listing Naspers has used Prosus as a dealmaking vehicle to pursue targets in hot markets such as food delivery, albeit with mixed success.
It has depended on the Tencent stake to generate a cash war-chest. Last month Naspers announced the sale of some of its stake for only the second time in its history, raising $14.5bn.
Some shareholders have pushed for Naspers to instead slash the discount by parcelling out the entire Tencent stake to investors. The company has been reluctant to do so, citing both strategy, and potential tax bills in the tens of billions of dollars.
“Tencent is crucial to our strategy… China is the largest internet market in the world. Our exposure to that has enabled us to build the company we are today,” van Dijk said.
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