JOHANNESBURG - Prosus NV plans to buy back a combined $5 billion of shares in the global e-commerce giant and its South African parent Naspers Ltd., a move designed to boost shareholder value and narrow a discount between the company and its stake in Tencent Holdings Ltd.
The group will aim to pick up $1.37 billion of its own stock and $3.63 billion of Naspers, Amsterdam-based Prosus said in a statement on Friday. The purchase will start following the release of half-year earnings on Nov. 23.
The move marks the latest in a series of efforts by Prosus and Naspers to achieve a valuation greater than the sum of its parts, and stop being seen as merely a proxy for investing in WeChat-creator Tencent. Cape Town-based Naspers was an early-stage investor in China’s Tencent, and still holds a 31% stake, but has long been overshadowed by the soaring stock price of its prized asset.
Naspers spun off most of its internet assets into Prosus just over a year ago in part to resolve the problem, but the move has made little difference. Prosus has a market capitalization of about 135 billion euros ($158 billion), while the Tencent stake is worth about 193 billion euros at current share prices.
That means the market assigns a negative value to Prosus’s myriad other businesses, which span from Indian online travel agents to Brazilian food delivery and U.S. education sites.
Failed Acquisitions
The buyback also reflects a failure to spend a bloated cash position on major acquisitions in the booming e-coommerce sector. The company lost an $8 billion battle to buy U.K. food group Just Eat Plc to Takeaway.com earlier this year, and in July lost out in a $9 billion auction for EBay Inc.’s classifieds business to Norwegian rival Adevinta ASA.
“The proposed transaction is a timely investment in the group’s strong internet portfolio, which is a sensible use of capital given full market valuations in consumer internet M&A,” Prosus said.
Prosus shares gained 0.4% in Amsterdam to 83.20 euros, representing a 12% gain since listing in the Netherlands capital in September 2019. Naspers increased 1% as of 9:20 a.m. in Johannesburg.
BLOOMBERG