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Prosus faces investor criticism over R2.1bn fee for Naspers share swap

According to a document submitted to stock exchanges on July 12.
Image: Jasper Juinen/Bloomberg

Technology investor Prosus will pay up to $144 million in transaction fees when it buys a block of parent company Naspers’ shares, according to a document submitted to stock exchanges on July 12, prompting criticism from some investors.

The fees total more than Prosus’ free cashflow for the year ended March 31, and are almost three times more than Naspers paid in 2019 to list Prosus on the Amsterdam Stock Exchange.

Some 95 million euros ($112 million) of the fees will be to cover securities transfer tax (STT), according to the document, reviewed by Reuters. The rest will be for costs such as fees for bankers, lawyers and accountants.

Prosus was spun out of Naspers in 2019 to hold the South African group’s international assets, including its 29% stake in Chinese tech giant Tencent. Naspers hoped the move would reduce the discount its shares traded to the value of its holding in Tencent.

However, the discount kept widening.

To try to address this, Prosus said in May it would issue new shares to buy up to 45.4% of Naspers in a share swap deal.

The deal will move more of Naspers’ Tencent stake to Amsterdam from Johannesburg and, according to the two firms, help Naspers close the value gap to its Tencent stake because Prosus’ stock is more highly valued than Naspers’.

The deal will also increase Prosus’ free float on Euronext.

“The overall costs are less than 1% of the total value unlock that happens on day one as result of exchanging high discount Naspers shares to lower discount Prosus shares,” Prosus told Reuters via email.

Some shareholders are unhappy with the costs after they had opposed the deal, saying it would create a complicated cross-holding structure that might increase the discount.

“I wouldn’t want to see such huge amounts of money being paid,” said Peter Takaendesa, head of equities at Mergence Investment Managers in South Africa.

“It is quite material, especially if we are comparing the two transactions,” he said, referring to the fees paid during the listing of Prosus.

Mergence was among 36 fund managers from South Africa who wrote to Prosus’ management in June opposing the transaction.

In a shareholder vote on July 9 that required a majority to pass, the transaction won 90% backing although up to 47% of outside shareholders in Prosus voted against it. Naspers holds over 73% of Prosus.

“We always work hard to please our shareholders while recognising that we have tens of thousands of shareholders with varying perspectives,” Prosus said in its statement to Reuters, adding that the majority vote at the Prosus extraordinary general meeting “confirms shareholder support for the transaction.”

When Naspers listed Prosus in 2019, it paid 29 million euros to financial advisers, compared with the 20 million euros Prosus will pay them for the share swap, the document shows.

Prosus did not have to pay any securities transaction tax for the 2019 listing, though investors said that did not address their discontent with the transaction costs.

“When you’re doing a bad transaction, and a transaction that many shareholders have expressed a concern on, then any amount you pay is too much,” said Rajay Ambekar, CEO at Excelsia Capital, a Cape Town-based asset manager with shares in Naspers.

“It is a real cost that shareholders are having to bear.”

COMMENTS   10

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Ah … the usual suspects: bankers, lawyers and accountants. Where did I go wrong?

When a listed company chooses to throw money away for no apparent benefit to its shareholders then it is time to ask WTF?

They should just deduct it from the hired help salaries…

Most of it is tax . ( $112 M ) Unavoidable I would say . Misleading headline !

This is literally looting… literally

77.7% is tax cost caused directly by the management of the company themselves, indirectly at the cost of the shareholder for a transaction between the 2 companies that still does not much sense to me

2 billion in STT – why not an OTC deal ?

Oh, everything with Naspers and Prosus is always an un-necessary and over -complicated process ?

The question is why ?

Its not like they making the money – and the brains behind the business – it’s blurry TENCENT –

Naspers and Prosus are just passengers getting a jolly free ride.

Rich(Richer) Management! Bob van Dijk smiles either way!

Poor Shareholders! This is creative destruction of Capital.

This silly transaction… will in my opinion not have any impact on gap.
Tencent is on a downward trajectory for now… permanent regulatory shock from the Chinese Government… difficult to see Tencent recovering short term

Investment bankers make money for not closing the discount. Well done.

Now that the Tencent stock has fallen, will management argue that they can’t be blamed as its just a passive investment, or will they forfeit bonuses?

End of comments.

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