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Prosus shareholders approve Naspers share purchase

That will move most of the economic value of the intertwined companies to Amsterdam.
Image: Dwayne Senior/Bloomberg

Shareholders of technology investor Prosus on Friday approved a deal with parent Naspers of South Africa that will move most of the economic value of the intertwined companies to Amsterdam.

Read: Naspers and Prosus barely scratching at a big problem

Under the deal, announced on May 11, Prosus — which has a 28.9% stake in Chinese internet giant Tencent — will launch an offer to buy up to 45.4% of Naspers’ shares, issuing new Prosus shares to pay for them.

Approval, which came with 90% of the votes in favour of the deal, was already virtually assured from the Prosus side as Naspers has kept a controlling stake in Prosus since spinning the company off in a 2019 initial public offering.

In an offer period that will run July 11-August 13, Naspers shareholders who wish to tender their shares to the Prosus offer will receive 2.27 new Prosus shares, a slight premium to Naspers’ current stock price.

Prosus shareholders will also benefit, executives say, as the Naspers shares they are buying trade at a deep discount to the value of their underlying assets. Both companies are worth less than the $200 billion stake in Tencent that is held by Prosus.

The deal is intended in part to reduce that valuation discrepancy, and to move more of Naspers out of South Africa where it has an outsized weighting on the Johannesburg Stock Exchange.

Once the deal is complete, Prosus will have an interest of roughly 60% in the underlying assets and Naspers roughly 40%. Naspers will retain control of Prosus via special voting rights, and they will continue to share a single board.

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Doubt any value will be unlocked.

Both currently on a downward trajectory.

Yep … probably the most underwhelming stocks on the JSE and sadly, the largest.It really seems that Naspers just got very lucky with Tencent and don’t know what to do with the profits.

Maybe time will tell with their acquisitions, but unexciting beyond belief.

Which shares are exciting or doing well on the JSE? So few these days outside of the resources boom.

So will this reduce Naspers weighting in top40? Or just move more of it to Prosus shares so Naspers+Prosus are the same in the Top40?

”A critic is a legless man who teaches running”
Channing Pollock (1880-1946)

Naspers accounts for 32.6% of the MSCI South Africa index.

I think investors should take notice of the 36 local asset managers like Ninety One, Coronation, Allan Gray etc. who has joined the chorus of those who have voiced their concerns about the proposed share swap between Naspers and Prosus.

Fortunately (”in die land van die blindes is die een-oog koning”), and Ninety One CEO Hendrik du Toit who is a non-executive director of both Naspers and Prosus, showed his personal hand and specifically recused himself from any decisions around Naspers.

His actions were obviously an attempt not to influence or participate in any investment decisions on the stock given his position as an independent director of Naspers.

This begs the question, what about the concentration risk that these asset managers/shareholders should be aware of and advise any current and/or future investor about?

Even the guy selling the newspapers (and there are not a lot left anymore) knows that putting money offshore can be an effective way to improve the profile of an investment plan.

Investing offshore so can broaden your exposure to sectors that aren’t as accessible in the local market, like the aerospace or medical device industries, and significantly reduce your portfolio’s volatility.”

End of comments.

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