Africa's most-valuable company plans entity holding its $134 billion stake in Tencent

By Alexandra Wexler and Paul J. Davies 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 26, 2019).

JOHANNESBURG -- Africa's most-valuable company, Naspers Ltd., plans to separately list its internet assets in Amsterdam, creating a European-traded tech giant that will hold its $134 billion stake in China's Tencent Holdings Ltd.

The new entity will consist of all the conglomerate's internet interests outside of South Africa, including its 31% stake in Tencent, as well as holdings in Russian social-media operator Mail.ru Group Ltd. and U.S. online marketplace Letgo.

Naspers will retain 75% of the Euronext Amsterdam-listed company, with the remaining shares distributed among its existing shareholders. It won't raise any money. Naspers hasn't yet decided how to price shares in the new, unnamed entity, but said its assets would have a book value of $140 billion.

That would give the 25% free float a book value of $35 billion, far larger than the market values of internet-focused companies in Europe, led by Adyen, a Dutch payments company with a market value of almost EUR20 billion.

The move is intended to unlock value for Naspers shareholders and allow investors to directly access its portfolio of international internet assets.

Naspers, with a market value around $100 billion, currently trades at a discount to the value of its stake in Tencent, despite having additional profitable businesses.

Analysts attribute part of the discount to a dividend-withholding tax that would kick in should Naspers ever sell out of Tencent and distribute the proceeds to investors.

Naspers also says that many institutional investors in South Africa have been forced to sell their shares in the company as it grew because of rules limiting how much they can invest in a single stock.

Chief Executive Bob van Dijk said the Amsterdam listing "should address some of those structural challenges" and that the company wasn't changing its strategy.

Much of the company's growth in recent years can be attributed to the rise in value of its stake in Tencent, best known in China for its WeChat messaging app. Naspers paid $34 million for its stake in 2001 and Tencent is now one of the world's most valuable companies. Naspers sold 2% of Tencent last year, netting a near-$10 billion windfall.

Naspers expects the listing to attract new investors, reduce the valuation discount and be included in various indexes, including the Euro Stoxx 50. That would make the entity a must-buy for many passive, index-tracking investment funds. Naspers thinks that could attract up to $3 billion of incremental flows.

While the new company will have some operating businesses, about 98.5% of its value is made up of minority holdings in other listed companies. That includes Tencent and others, including German food-delivery business Delivery Hero and India-based travel business MakeMyTrip.

Investors might compare it to other listed investment holding companies like Exor, the Amsterdam-listed vehicle that owns 29% of Fiat Chrysler on behalf of the Agnelli family, or Sweden-listed Investor AB, which holds the investments of the Wallenberg family.

Naspers chose Amsterdam because some of its internet operations are already housed in the Netherlands. It also has executives based in the country and says it is an easy place to attract talent.

Naspers has successfully shape-shifted before. Founded in Stellenbosch, the wine capital of South Africa, in 1915, Naspers was originally De Nationale Pers Beperkt, or the National Press Ltd., which produced a Dutch-language newspaper for the country's Afrikaner population. The company and its publications became propagandists for the National Party, which came to power in 1948 and instituted the system of racial segregation known as apartheid.

In the 1980s, the company began expanding beyond its publishing roots, including into video entertainment. Since then the company has shifted its focused to online classified advertisements, payments and food delivery.

Carlo Martuscelli contributed to this article.

Write to Alexandra Wexler at alexandra.wexler@wsj.com and Paul J. Davies at paul.davies@wsj.com

(END) Dow Jones Newswires

March 26, 2019 02:47 ET (06:47 GMT)

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