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Bekker has R6bn in Naspers shares

The sharp surge in the Naspers N share price since 2008 means that Koos Bekker, the group chief executive, is in line to secure a remuneration package that is valued at about R680 million for each of the five years from 2008 to end financial 2013, making him one of the top paid executives in the country.

Bekker is holding R6 billion worth of Naspers N shares according to the group’s recently released annual report. Some 7.8 million Naspers N shares are held directly by Bekker and 4.7 million are held indirectly.

Koos Bekker, group chief executive of Naspers. Photo: Leon Lestrade. Credit: INLSA

The shares that are held directly by Bekker were awarded to him in terms of his five-year contract with the company. In terms of that unique contract Bekker does not receive any salary, bonus, car scheme, medical or pension contributions from the company. In lieu of remuneration Bekker was awarded 11.7 million shares, which vest in three annual tranches of 3.9 million shares in years three, four and five.

The 11.7 million shares were allocated to Bekker at the price ruling at the beginning of his five-year contract in 2008, which is approximately R150.

In addition, each time the 3.9 million tranche of shares is received by Bekker, he is required to pay an amount to cover inflation since 2008.

Thus in 2011, when he received his first allocation, Bekker paid R167 a share for each of his 3.9 million shares. In 2012 he paid R176 a share for the second tranche of 3.9 million shares and in 2013 Bekker will be required to pay R185 a share for the final 3.9 million tranche.

The total cost for the three tranches of shares he has received in terms of his current five-year contract is just over R2bn. These shares have a current market value of R5.6bn. If this R3.6bn profit is annualised over the five-year period of the contract, it is equivalent to R720m a year, making the very low-key Bekker one of the highest paid executives in South Africa.

Given that there is still seven months before Bekker is awarded the final 3.9 million tranche there is a very slight risk that the Naspers N share could collapse from its current level of R470 to below the R185 a share that Bekker is required to pay if he wants the shares. If this were to happen Bekker would be sitting with a profit of R2.2bn and not R3.4bn.

However, if the share price moves above the current level then he stands to make even more than the estimated R3.6bn from his five-year contract.

The Naspers chief executive, who was first appointed in 1997, is on his third five-year contract. In terms of the first contract Bekker was allocated 3.3 million shares in total. These shares were released in three tranches over five years ending December 2003. However, the 2001 dotcom collapse meant that there was little value in the shares by the time that they were awarded to Bekker. The group’s 2003 annual report reveals that Bekker did acquire 4.6 million Naspers shares during that financial year.

The second five-year contract saw Bekker being allocated 4.4 million shares in 2003 at R21.40 a share. The shares were again released to Bekker in three tranches, with the price adjusted for inflation. The steady upward trajectory of the share price during this five-year period meant that Bekker secured considerable profits.

However, the current contract, which is due to expire next year, is by far the most valuable. During the past five years the Naspers N share has surged on the back of the acquisition in 2004 of a 34 percent stake in China-based Tencent.

A recent report entitled “Naspers, not for the faint-hearted” by Anchor Capital noted that Tencent accounted for R175bn of Naspers’ R190bn market capitalisation. While Tencent was the major driver behind the share price, Anchor Capital argued that some profits from the massive spend in other internet ventures should also be a big share price driver.

Anchor noted that the short-term subdued earnings outlook and high Tencent valuation counted against the share, but might be a good play in the long run. If that happens, then the 16.4 million shares Bekker looks set to own will be worth more than the current R7.9bn.

On Friday Naspers closed 0.7 percent lower at R469.83.

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