South African e-commerce group Naspers is listing its global empire of consumer internet assets under the name of Prosus on Wednesday – and the jewel in the crown is a 31% stake in Chinese tech titan Tencent.
The spin-off in Amsterdam marks the end of an era for Naspers as it looks to move beyond the legacy of former CEO Koos Bekker’s prescient investment of just $34 million in Tencent when it was a startup in 2001, one of the most lucrative bets in corporate history.
The stake in Tencent, the world’s biggest videogame company and home to the hugely popular WeChat social media platform, is now worth $130 billion and has buttressed Naspers’ rapid growth towards becoming Africa’s most valuable listed company.
Due to that holding, Prosus should have a market value of more than $100 billion in one go, which would make it the third-largest stock on the Amsterdam exchange after Shell and Unilever, and Europe’s No.2 tech firm after Germany’s SAP. European players are still, however, dwarfed by the likes of Facebook and Amazon in the United States.
Indicative pricing in the Amsterdam share issue is expected after the close of markets on Tuesday, with trading beginning Wednesday morning.
The Tencent stake has been worth more than Naspers itself for years, and dominated the $103 billion group’s finances. One motivation for spinning off Prosus is to narrow that value gap.
One reason for the discount is Naspers’ heavy weighting on the Johannesburg Stock Exchange – the stock currently represents around a quarter of the value of the shareholder-weighted top 40 index, which makes it difficult for index investors attempting to limit their exposure to a single share.
The Prosus listing should see about a quarter of Naspers’ value move to Amsterdam.
“We believe Prosus will present a new and attractive opportunity for global tech investors to access our unique portfolio of internet businesses, providing a strong foundation for our future growth plans,” said CEO Bob van Dijk.
“The listing is also designed to reduce our weighting on the Johannesburg Stock Exchange, which we believe will maximise shareholder value over time.”
Naspers will retain a 75% stake in Prosus, with the other 25% stake distributed to Naspers shareholders and making up the free float.
Food delivery firms
Prosus also has stakes in fast-growing food delivery, social media, and payments companies in China, India, Brazil and Russia.
In the food and delivery sector, it owns stakes in Delivery Hero, Takeaway.com, Latin America’s iFood, and India’s Swiggy.
For the fiscal year ended in March 2019, Prosus posted a 15% rise in revenue to $2.65 billion, and its operating loss narrowed to $418 million from $615 million.
Prosus accounts for its Tencent stake as an “equity accounted investment”, which added $3.41 billion euros to 2019 pre-tax profit. Prosus’ net profit ended up being $4.25 billion, thanks to a $1.6 billion windfall on its sale of a 10% stake in Flipkart to Walmart.
Jasper Jansen, an analyst at the Dutch shareholders rights group VEB, said he applauded the arrival of Prosus.
“We love the fresh blood: finally there’s a real company listing here that’s active in the new economy,” he said.
However, he criticised Naspers’ decision to maintain a two-class share structure system which gives its biggest shareholders extra voting rights in some circumstances.