Prosus To Buy 45% of Naspers

The big news yesterday was that Prosus is making an offer to buy 45.4% of Naspers. This is all part of the management team's goal of reducing the NAV discount. At present, Naspers trades on about a 48% discount to NAV and Prosus "only" at a 36% discount. The idea is to move shares from the high discount company to the low discount company, thus 'unlocking value for shareholders'.

If that wasn't complicated enough, Naspers currently owns 73% of Prosus, so selling 45% of Naspers to Prosus creates a circular holding. The transaction will dilute Naspers' shareholding in Prosus. After the deal, their stake will drop from 73% to 57%. But wait, there is more! For tax and management reasons, Prosus will issue Naspers with super-voting shares, giving Naspers an effective 70% voting control over Prosus.

Got it? As the saying goes, this is as clear as mud. I'm not convinced that adding more complexity to the structure will solve their discount to NAV problem.

The share prices of Naspers and Prosus were up around 3% for most of yesterday, but this is on a day where Tencent was up 2.4%. Unfortunately, Naspers took a nose dive into the closing bell, ending the day down 1.6%. It looks like the market was more excited by the rise in the Tencent share price than it was in the proposal. If this works in reducing the discount to NAV, then great! If not, then it is back to the drawing board for management.

If you are a Vestact client, we will get in touch with you directly about what to do with your own holdings.