The Dutch arm of South African internet titan Naspers, Prosus announced on Friday plans to acquire up to $5 billion (R82 billion) in total of Naspers and Prosus shares. The company said this was a further step to crystalise value for shareholders.
The deal follows earlier actions such as the unbundling of MultiChoice Group and the listing of Prosus on Euronext Amsterdam last year.
The company added that 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).
Prosus is 73.8% owned by Naspers, with a free float of 26.2%.
Prosus assets comprise its international internet interests outside of South Africa, including operations and investments in online classifieds, food delivery, payments and FinTech, etail, education, and social and internet platforms.
It also has a secondary, inward listing on the Johannesburg Stock Exchange.
In total, up to $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 said it intends not to vote for 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.
“We have found several large M&A opportunities in our sector to be fully priced and have stayed disciplined,” Bob van Dijk, Chief Executive Officer of Prosus and Naspers, said.
“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.”
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.
“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,” Basil Sgourdos, Chief Financial Officer of Prosus and Naspers, said.
“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.”
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.
As Europe’s largest listed consumer internet company by asset value, Prosus gives global internet investors direct access to Naspers’s portfolio of international internet assets through exposure to China, India and other high-growth markets, as well as to the global tech sector. At the time of the listing, around $16 billion of value was unlocked for Naspers’s shareholders by reducing the discount to the combined net asset value of Prosus and Naspers.