Prosus on hunt for deals after cash reaches $4.3 billion

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The CEO of Prosus and Naspers, Bob van Dijk, speaks on stage at TechCrunch Disrupt Berlin 2019 at Arena Berlin on December 11, 2019.
The CEO of Prosus and Naspers, Bob van Dijk, speaks on stage at TechCrunch Disrupt Berlin 2019 at Arena Berlin on December 11, 2019.
Noam Galai/Getty Images for TechCrunch

Prosus is on the lookout for acquisitions after the e-commerce giant reported a 28% rise in first-half earnings and a net cash position of $4.3 billion.

The owner of global internet assets specializing in the likes of food delivery, payments and online education lost out on two high-profile takeover battles in the past year and maintains a strong cash position, according to a statement on Monday. The company also raised $2 billion in a July debt sale that drew strong investor demand.

"We continue to explore growth opportunities to advance our strategy," Prosus said.

Prosus' focus on e-commerce has proven effective during the Covid-19 pandemic, which drove demand for internet services around the world. However some sectors, such as online travel, were hit by a slump in demand for holidays. While the longer term economic impact of the crisis is unclear, Prosus is "cautiously optimistic" about its prospects, the company said.

"We invested $600 million in our businesses in the first half, especially online food delivery and education," Chief Executive Officer Bob van Dijk said in an interview with Bloomberg TV. Coronavirus lockdowns saw many people turn to online services that are likely to keep using them, he said.

At least another $600 million has been invested since September, Chief Financial Officer Basil Sgourdos said on a call with reporters.

Deals to have eluded Prosus include a battle for Just Eat, which was eventually bought by Takeaway.com, while EBay's classifieds business was acquired by Prosus' smaller Norwegian rival, Adevinta ASA, for $9.2 billion.

Valuation Gap

Among challenges facing Prosus Chief Executive Officer Bob van Dijk is a persistent gap in the company's valuation and its crown jewel: A 31% stake in Chinese giant Tencent Holdings. The Amsterdam-listed company's stock has gained 37% this year to give a market cap of 148 billion euros ($176 billion), but the Tencent shareholding is worth about 191 billion euros.

"Our investments are generating a great return-  this is the most important component to us narrowing the discount," Van Dijk said on a call with reporters.

This was also a problem for Naspers, the South African company that spun off Prosus in 2019 in part to try and reduce the discount. Prosus said last month it would buy back a combined $5 billion of shares in itself and Naspers in a move designed to boost shareholder value and try to narrow the gap, and will kick off the process Tuesday.

Naspers also reported first-half financials on Monday, and said earnings fell due to its now 73% shareholding in Prosus. Its shares gained 0.2% as of 9:21 a.m. in Johannesburg.

* Fin24 is part of Media24, a subsidiary of Naspers.

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