Introducing Prosus: A Rare European Mega-Tech Company Stock
September 11 2019 - 7:44AM
Dow Jones News
By Alexandra Wexler
Shares in an internet conglomerate that is the largest
shareholder in China's Tencent Holdings Ltd. soared Wednesday,
after listing its assets under the name Prosus NV in Amsterdam --
instantly creating a rare European tech giant.
Prosus, which is made up of the international internet assets of
South African holding company Naspers Ltd., gives Europe
significant exposure to a fast-growing, consumer-facing tech
company.
Shares in Prosus were trading up more than 25% at EUR74.56 ($82)
each in European trading on Wednesday morning, from a reference
price of EUR58.70 a share provided by Naspers, making Prosus one of
the most valuable companies in Europe by market capitalization,
valued at around $133 billion.
Europe lacks its own tech giants. Business process software
maker SAP SE has a market capitalization of around $148 billion,
but doesn't have a consumer-facing focus.
If the valuation holds up, however, Prosus would end the day as
one of the 15 largest companies in Europe by market cap, between
oil giants Total SA and BP PLC, according to FactSet. It is the
third-largest company on the Amsterdam exchange after Royal Dutch
Shell PLC and consumer giant Unilever NV.
Prosus owns a nearly one-third stake in the Chinese internet and
gaming colossus Tencent, as well as holdings in Russian
social-media operator Mail.ru Group Ltd., German food-delivery
business Delivery Hero and U.S. online marketplace Letgo, among
others.
The listing, which didn't raise any new money from investors,
appeared to succeed in narrowing the discount investors slapped on
South Africa-listed Naspers compared with the value of its
Hong-Kong listed Tencent stake. The Tencent stake, now housed in
Prosus, is worth more than $131 billion on paper.
Naspers has long traded for less than that, despite having
additional profitable businesses, such as its online classifieds
segment.
Investors applied a discount on Naspers shares compared with its
Tencent holding because Naspers would need to pay a
dividend-withholding tax should it ever sell its stake in Tencent
and distribute the proceeds to investors. Another reason is lack of
liquidity: Investors can also gain direct access to Tencent shares
through its Hong Kong listing.
"The discount on the Prosus listing is a lot narrower than the
discount on the Naspers listing," said Hannes van den Berg, co-head
of South African equity and multiasset at Investec Asset
Management. For the Naspers investor, "Am I better off today than I
was yesterday? Yes."
Naspers executives said the company had become too big for its
home on the Johannesburg Stock Exchange -- where it comprises about
a quarter of the benchmark JSE SWIX Index. They wanted to develop a
new investor base by trading its shares in Europe, where large,
listed tech companies are scarce.
Founded in 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.
In the 1980s, the company began expanding beyond its publishing
roots, including into video entertainment.
Naspers paid $34 million for its original Tencent 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. Much of Naspers' 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.
Late last year, Naspers led a $1 billion funding round in
Swiggy, India's largest food-delivery platform and committed $400
million in funding for iFood, the leading online food-delivery
platform in Latin America. In the U.S., in addition to Letgo, a
competitor of Craigslist Inc., Naspers has made bets including
Honor, an online network of home-care agencies for the elderly,
FarmLogs, which provides technology solutions for row-crop farming
and Udemy, an online learning marketplace.
For the Amsterdam listing, existing Naspers shareholders in
South Africa are issued one Prosus share for each Naspers share.
Individual investors in South Africa have the option to receive an
additional Naspers share in lieu of the Prosus share, which might
be more attractive to them for tax reasons. Those shareholders have
until Friday to make that decision.
Naspers plans to retain at least 73% of Prosus, with the final
amount expected to be announced on Monday after South African
individual investors submit their decisions.
Write to Alexandra Wexler at alexandra.wexler@wsj.com
(END) Dow Jones Newswires
September 11, 2019 07:29 ET (11:29 GMT)
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