Proudly sponsored by

Russia-Ukraine war forces difficult decisions on Prosus

Selling its big businesses in Russia amid the current uncertainty won’t be easy.
Tragic times: businesses within the Prosus stable have employees in Ukraine (pictured) as well as Russia. Image: Anastasia Vlasova/Getty Images

Russia’s invasion of Ukraine caught the world by surprise, as did the escalation in the fighting – and after nearly three months, there still isn’t a solution in sight.

The world effectively entered the war, on the side of the Ukrainians. Several countries offered financial and humanitarian assistance, as well as military support by supplying Ukraine with weapons.

Read: Prosus to sell Russian online marketplace Avito, formerly worth $6bn

People around the world attacked Russia, widely condemning the invasion, instilling economic sanctions and forcing companies to break business ties with the country.

The Naspers and Prosus conglomeration got caught on both sides of the escalating war.

Within days of the start of hostilities the group put out a statement condemning the invasion.

‘Appalled’

“We are appalled by the war in Ukraine and highly concerned for everyone affected. We hope that a diplomatic solution can be found to de-escalate the situation as quickly as possible,” the group said in a statement on March 2.

At the same time, Prosus has responsibilities towards loyal employees in its Russian businesses. After all, they did not start the war.

“We have … more than 4,000 employees in Russia working for our locally-run Russian classifieds business, Avito. Avito is supporting all of its team through this uncertain time,” Prosus said at the beginning of March.

“Our OLX Europe business employs 350 people in Ukraine and their safety is of paramount importance. We are in close contact with our Ukrainian employees and we are taking all appropriate action to support them.

“We have arranged accommodation for employees and their families wishing to relocate away from the east of Ukraine and into the west, and also to leave Ukraine where this is possible,” said Prosus.

“Colleagues in neighbouring countries are offering their own support to Ukraine-based employees and their families.

“We have also advanced salaries and have offered additional financial support to those in need.

“Additionally, OLX Europe has committed US$350,000 (US$1,000 for every OLX Ukraine employee) to the International Committee of the Red Cross, which is providing humanitarian aid at this time to the local communities in Ukraine,” Prosus said in its statement, adding that “at this stage, we cannot speculate on the longer-term implications for our operations and investments”.

Selling

Unfortunately, the war escalated. Global opinion and economic sanctions against Russia are effectively forcing businesses to cut ties with Russia and have led to Prosus/Naspers deciding to sell its stake in the Russian online classified advertisement business Avito.

Management responded with only a general reply to Moneyweb’s questions on this difficult issue.

“On 25 March 2022, we announced the separation of Avito from our OLX Group. Following completion of the operational separation, and given the ongoing war in Ukraine and unpredictable environment, we have concluded that continued ownership of Avito is no longer tenable,” according to Naspers.

It says Avito has not been sanctioned, and repeated a previous statement that the group has started to search for an appropriate buyer for its shareholding in Avito. It described an appropriate buyer as someone “who shares our views on running online platforms for the benefit of the customers and communities they serve and the people they employ”.

Naspers did not confirm, or deny, the figure being bandied around that Avito was valued at $6 billion (R94.6 billion) at some point.

Read: Barloworld ‘to hunker down in Russia’ – CEO

“Regarding Avito’s value, we have only just started the sale process and our auditors are still going through the valuation of all our assets as part of our usual year end process, so we cannot comment on that.”

Regarding Russian internet company the VK Group and fintech PayU Russia, Naspers said “we announced in March that we plan to write down the full carrying value of our interest in VK and we are working to exit this shareholding”. It added that its directors on the VK board resigned their positions in March.

Read: Prosus expects R11.83bn writedown on its stake in Russia’s VK

“We will also exit PayU Russia, our payments business in Russia,” according to the short statement.

Avito

Avito is a big business. Prosus notes on its website that Avito is the leading classifieds platform in Russia and one of the top eight most visited websites in the country.

It is the second largest online classifieds business in the world with 35 million unique visitors a month, and growing.

“Thousands of Russian businesses use Avito to sell products to consumers, ranging from cars and real estate to clothing and electronics. Since it started, millions of Russians have used Avito to buy and sell anything from houses, to cars and mobile phones, making life easier for thousands of people in Russia, every day,” it said.

Naspers invested in Avito in March 2013 and became the largest shareholder of the company in 2015. Avito was moved to Prosus following the reorganisation of Naspers and the creation and listing of Prosus.

Everything changed in a few weeks. On March 21, following Russia’s attack on Ukraine on February 24, Prosus issued another statement regarding Avito: “Our Avito classifieds site in Russia hosts around 90 million active adverts and moderates around 5 million new listings every day. We were made aware of a small number of job adverts for military vacancies that had been posted on Avito, and this has now been addressed.”

Read: Prosus removes military job adverts on Russian online marketplace

A statement on March 25 informed shareholders that Prosus had taken a decision to cease all involvement in its Russian operations. It separated Avito from the OLX entity and said that Avito would operate as an independent Russian entity, run by a local management team and governed by its own board of directors.

“Prosus will have no day-to-day involvement in the operations of the business and will neither invest further nor seek to benefit economically from the interest in Avito in these circumstances,” it said, adding that Prosus directors have resigned from the boards of Russian businesses.

Buyers?

The most difficult question is surely who will buy Avito and the other Russian businesses.

An “appropriate” buyer would be difficult to find. If disinvestment is forced – either by risk to Prosus’s good name, business risk or stricter sanctions – the same restrictions would apply to any buyer too.

Maybe one of the rich Russian oligarchs could pick Avito up at a bargain price, but Prosus might not have any of these wealthy politically-connected business leaders on its list of “appropriate buyers”.

Maybe the best solution would be that hostilities end before Prosus can find a buyer and the Russian businesses can help to foster peace.

Buying is often easier than selling, and it isn’t always possible to repurchase something you have sold.

Meanwhile, Prosus announced further support to Ukrainian citizens. “Prosus is contributing $10 million to support humanitarian aid efforts in Ukraine,”  it said.

“Donations will be made directly to registered and established charities to ensure the funding reaches those people most in need and our Ukrainian and Polish employees will be involved in the selection of the charities. We expect to complete the $10m [around R157.6 million] of donations over the next six months,” Prosus said in a statement dated March 30.

“This contribution is in addition to the support already in place for our employees and customers in Ukraine.”

AUTHOR PROFILE

COMMENTS   2

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

There is no ESG responsibility with Prosus. Nothing.

Prosus was slow in their russian disclosures.. They waited until March to write down their 27% stake in VK (mail.ru) after their oligarch business partner in VK (Alisher Usmanov) transferred his 57% interest to the russian state insurance company for an undisclosed sum back in December already. Talk is it was basically transfer of a social media asset from putin’s pal to putin ahead of the war.

You can’t be in bed with bad state players in communist countries and also expect to maintain a clean front on western stock exchanges.

It is also time somebody calls bs on the notion that prosus reports tencent in consolidated financial statements as a subsidiary. Prosus / Naspers have absolutely zero influence in tencent revenue, expenses, operations or strategy nor do they have a call to its cashflows. The chinese communist party can do what it wants with tencent. Modern accounting standards are a sham if prosus and naspers auditors can look the other way while such nonsense goes on. Whatever happened to substance over form?

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: