As expected, Naspers-Prosus share swap gets go-ahead

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The CEO of Prosus and Naspers, Bob van Dijk.
The CEO of Prosus and Naspers, Bob van Dijk.
Noam Galai/Getty Images for TechCrunch
  • Shareholders who hold 90.19% of Prosus shares voted in favour of a share exchange with Naspers, to address a discount gap. 
  • The transaction looks to reduce Naspers' weighting on the SWIX index from 23% to around 11% to 13%.
  • Naspers and Prosus have been trading at deep discounts to their 28% stake in Chinese tech behemoth Tencent.

As expected, a majority of Prosus shareholders voted in favour of a complex new attempt to bolster its share price, along with that of its parent Naspers.

Prosus held a virtual extraordinary general meeting on Friday, in which its shareholders voted on a proposed voluntary share exchange offer for Naspers shares.

Shareholders who hold 90.19% of shares in Prosus voted in favour of the deal.

Naspers and Prosus are trading at deep discounts to what their 28% stake in Chinese tech behemoth Tencent, together with their other investments, is worth. The proposed transaction is meant to address this discount gap.

Following shareholder approval, Naspers shareholders can swap their shares for newly created shares in Prosus. The new plan will, in essence, make Prosus bigger, and Naspers smaller. New shares will be created in Prosus, which will increase its free float in Amsterdam.

On Friday, Naspers CEO Bob van Dijk said that there is a correlation between Naspers' increasing size on the Johannesburg Stock Exchange (JSE) and the growth in the discount to the net asset value.  

The rising discount at Naspers in turn lifts the discount level at Prosus as both stocks have traded in tandem since Prosus was listed on the Euronext bourse in Amsterdam in 2019.

Naspers currently represents 23% of the weighted SWIX index.

"…Naspers' size on the Johannesburg Stock Exchange has become a real problem and it is a problem that is set to get worse, and rapidly as we continue to grow," said Van Dijk. As Naspers' share price rises, most investors are forced to sell off shares in order to meet prudential limits.

The share exchange should reduce Naspers' weighting to around 11% to 13%. In turn, Prosus' weighting on Euronext is set to double, said Van Dijk. "We expect a larger and more liquid Prosus to benefit those exchanging shares in the long term and will improve the Prosus discount, which will accrue to Naspes - Prosus's largest shareholder," he said.

The deal faced fierce criticism from some investors, who believe it was too complex and won't make any difference in shrinking the discount.

Last month, Moneyweb reported that 36 asset managers -  including the Public Investment Corporation (which manages civil servant pensions) as well as Nedbank Private Wealth, Prudential, Kagiso Asset Management and Denker Capital - sent a letter to the Naspers and Prosus boards, objecting to the deal. 

They criticised the introduction of cross-shareholding between Prosus and Naspers, which would complicate holdings, and also said that management remuneration continued to be linked more to the performance of Tencent and not to Prosus' own businesses.

Commenting on the transaction ahead of the vote, Vaughan Henkel, head of equity research at PSG Wealth, echoed views that the transaction would "fail to reduce the discount". 

"With a 'locked-in' discount, the complicated cross-holding structure may hinder management's ability to unlock further value for shareholders, thus warranting the larger discounts."

Naspers' share price hardly moved after the vote. At 14:52 it was trading at around R2 765.25. It had started the day at R2 791.01.

Fin24 is part of the Naspers-owned Media24 stable.

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